GOVERNMENT2006 - 2009"
GUIDELINES FORINFRASTRUCTURE ASSET
MANAGEMENT INLOCAL GOVERNMENT
2006 – 2009
ACKNOWLEDGEMENTS
Project Sponsor
Molatelo Montwedi – Executive Manager Municipal Infrastructure, dplg
Authors
Louis Boshoff – Assignment Leader (i @ Consulting)
Rob Childs (i @ Consulting)
Lisa Roberts (Maunsell)
Stakeholder inputs
The participation of a number of stakeholder groups is gratefully acknowledged. The inputs of the following parties in
particular deserve notice:
* Cities Network Focus Group on Infrastructure (Buffalo City Local Municipality, City of Cape Town Metropolitan
Municipality,City of Johannesburg Metropolitan Municipality, Ekurhuleni Metropolitan Municipality, Ethekwini Metropolitan
Municipality, Msunduzi Local Municipality, Nelson Mandela Metropolitan Municipality, Tshwane Metropolitan Municipality)
* Members of the Municipal Infrastructure Technical Task Team (MIT3)
* Office of the Accountant General (Hester Hermus)
* Department of Water Affairs and Forestry (Fred van Zyl)
Illustrations, lay-out and design
Chantel Colyn (i @ Consulting)
Case study material
Capricorn District Municipality
Lephalale Municipality
SPECIAL ACKNOWLEDGEMENTS
The authors wish to thank the Association of Local Government Engineering NZ Inc (INGENIUM) and the National Asset
Management Steering (NAMS) Group, whose work as contained in the International Infrastructure Management Manual
(International Edition 2006) and other products provided the concepts that underpin this Guideline. The NAMS Group (NZ)
has given written permission for the use of specific extracts from their publications in this guideline. This concession enables
this Guideline to be modeled upon best international asset practices.
© Copyright subsists in this work.
No part of this work may be reproduced in any form or by any means without the publisher’s written permission. Any
unauthorised reproduction of this work will constitute a copyright infringement and render the doer liable under civil and
criminal law.
Whilst every effort has been made to ensure that the information in this work is accurate, no responsibility for any loss or
damage suffered by any person as a result of the reliance upon the information contained therein.
Any inquiries regarding the publication should be directed to:
Chief Directorate: Municipal Infrastructure
Department of Provincial and Local Government
Private Bag X804
Pretoria
0001
Tel: (012) 334 4995
Fax: (012) 334 0540
"GUIDELINES FOR INFRASTRUCTURE ASSET MANAGEMENT IN LOCAL GOVERNMENT 2006 - 2009"
FOREWORD
Municipalities are custodians of community infrastructure such as roads, waste disposal sites, water and sanitation
systems, and public facilities. As Government, we are committed to extend infrastructure service delivery to all
South Africans. To this end we have created the Municipal Infrastructure Grant in 2004 to assist municipalities to
complement the capital budgets of municipalities for the provision of infrastructure to the poor communities.
In March 2006, Cabinet approved the National Infrastructure Maintenance Strategy and so reinforced Government’s
support for the protection of community assets through well considered maintenance and renewal strategies aimed at
furthering the objective of sustainable infrastructure services delivery.
Infrastructure is the cornerstone of social upliftment, public health and safety. Infrastructure is essential to achieve
the increased levels of economic growth through job creation and the establishment of well serviced areas conducive
for economic investment.
Infrastructure assets and community facilities are complex by nature and require robust management practices.
Sound knowledge of the location, characteristics, estimated lives, capacity and utilisation, cost characteristics, risk
exposure and safety requirements of assets is required to best manage them and make sustainable improvements in
service delivery.
We support local government in achieving programmes that promote sustainable quality of life to all citizens. As part
of a broader and ongoing support framework, we have developed this guide with inputs from local government
practitioners. This guide has been compiled to assist municipal immovable asset managers. In particular, its
application will assist in strengthening IDP processes and outcomes, the implementation of generally accepted
municipal accounting practices related to immovable assets, improve infrastructure investment planning efforts and
other municipal systems related to municipal infrastructure.
The guide draws on internationally accepted best practice, but has a strong South African flavor, given our unique
context. The Office of the Accountant General has also been involved in ensuring compliance with local government
specific accounting standards, and that sound financial asset management practices are embodied in this Guideline.
Thus international best practice is presented in a manner that meets local legislative requirements and addresses
local challenges. Case studies of how South African municipalities have successfully implemented asset management
practices are provided.
This guide has been prepared specifically to assist small to medium size local municipalities in addressing the
infrastructure management challenges that they face. The techniques are as far as possible presented in a format
that is easy to understand and apply, supplemented by practical examples. Whilst larger, more capacitated
municipalities may wish to apply more advanced techniques and systems, we believe that they will also benefit from
the principles, frameworks, processes and techniques described in this guide.
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TABLE OF CONTENTS
DEFINITIONS ......................................................................................................................................... v
ACRONYMS............................................................................................................................................. x
LIST OF SYMBOLS................................................................................................................................... xii
PREFACE................................................................................................................................................. xiii
1. INTRODUCTION TO INFRASTRUCTURE ASSET MANAGEMENT........................................................ 1-1
1.1 Background..................................................................................................................................... 1-1
1.2 National Challenges.......................................................................................................................... 1-2
1.3 Key Asset Management Concepts....................................................................................................... 1-3
1.4 International Infrastructure Management Manual ................................................................................. 1-5
1.5 Legislative Framework ...................................................................................................................... 1-5
1.6 Technical Norms and Standards ......................................................................................................... 1-7
1.7 Accounting Standards ...................................................................................................................... 1-8
1.8 Terminology ................................................................................................................................... 1-9
2. STRATEGIC FRAMEWORK FOR INFRASTRUCTURE ASSET MANAGEMENT ....................................... 2-1
2.1 Introduction .................................................................................................................................... 2-1
2.2 Legislative Drivers for the Asset Management Framework ..................................................................... 2-1
2.3 Infrastructure Asset Management Framework ..................................................................................... 2-2
2.4 Infrastructure Asset Management Policy ............................................................................................ 2-3
2.5 Asset Management Strategy.............................................................................................................. 2-6
2.6 Infrastructure Asset Management Plans ............................................................................................. 2-7
2.7 Comprehensive Municipal Infrastructure Plan....................................................................................... 2-7
2.8 Minimum Requirements .................................................................................................................... 2-8
2.9 Summary ....................................................................................................................................... 2-8
3. GETTING STARTED ........................................................................................................................ 3-1
3.1 Approaches to Starting Out ............................................................................................................... 3-1
3.2 Setting up the Enablers .................................................................................................................... 3-2
3.3 Critical Success Factors ................................................................................................................... 3-5
3.4 Summary........................................................................................................................................ 3-5
4. INFRASTRUCTURE ASSET MANAGEMENT PLAN ............................................................................. 4-1
4.1 Approach ........................................................................................................................................ 4-1
4.2 Minimum Requirements .................................................................................................................... 4-2
4.3 Document Format ............................................................................................................................ 4-3
4.4 Methodology ................................................................................................................................... 4-6
4.5 Selecting the Appropriate Level of Detail............................................................................................. 4-7
4.6 Summary........................................................................................................................................ 4-7
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5. COMPREHENSIVE MUNICIPAL INFRASTRUCTURE PLAN (CMIP) ................................................... 5-1
5.1 The purpose of CMIP ........................................................................................................................ 5-1
5.2 Process for Developing the CMIP........................................................................................................ 5-3
5.3 CMIP Format ................................................................................................................................... 5-5
5.4 Minimum Requirements for a CMIP..................................................................................................... 5-6
5.5 Summary ....................................................................................................................................... 5-6
6. BASIC ASSET MANAGEMENT TOOLKIT........................................................................................... 6-1
6.1 Information and Data Collection......................................................................................................... 6-1
6.2 Asset Knowledge..............................................................................................................................6-16
6.3 Establishing Levels of Service ...........................................................................................................6-18
6.4 Demand..........................................................................................................................................6-29
6.5 Risk Management ...........................................................................................................................6-31
6.6 Life-cycle Plan ................................................................................................................................6-36
6.7 Financial Planning ...........................................................................................................................6-40
6.8 Asset Management Practice Improvement Plan ....................................................................................6-55
6.9 IAM Plan Adoption ...........................................................................................................................6-60
6.10 Consolidating asset information and strategies for the CMIP ..................................................................6-60
6.11 Summary........................................................................................................................................6-61
7. REFERENCES ................................................................................................................................. 7-1
LIST OF FIGURES AND TABLES:
∼ Figure 1-1: Comprehensive Municipal Infrastructure Plans
∼ Figure 1-2: Lifecycle of an Asset
∼ Figure 1-3: Lifecycle Asset Management
∼ Figure 1-4: Local Government Specific Legislation
∼ Figure 1-5: Overview of Definitions of IAM Expenditure Categories
∼ Figure 2-1: Strategic Infrastructure Asset Management Framework
∼ Figure 2-2: Policy and Strategic Framework
∼ Figure 3-1: Getting started with an asset management programme
∼ Figure 3-2: Typical Asset Management Team Structure
∼ Figure 3-3: Example Roadmap for Establishing a Comprehensive IAM System for a Large Municipality
∼ Figure 3-4: Case study: How the Lephalale Municipality approached asset management
∼ Figure 4-1: Process for Preparing an Asset Management Plan
∼ Figure 4-2: Example Methodology for Preparation of an IAMP
∼ Figure 4-3: Format of an IAM Plan
∼ Figure 5-1: Integration of Infrastructure Asset Management Plans
∼ Figure 5-2: Infrastructure inputs to the IDP
∼ Figure 5-3: CMIP feeding into draft IDP
∼ Figure 5-4: Typical Format of CMIP
∼ Figure 6-1: Process for Establishing an Infrastructure Asset Register
∼ Figure 6-2: Infrastructure Asset Lifecycle Cost Models
∼ Figure 6-3: Possible systems linkages to the Asset Register
∼ Figure 6-4: Typical deterioration curve
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∼ Figure 6-5: Nature and Extent of Assets
∼ Figure 6-6: Length, Age and Material – Water Reticulation
∼ Figure 6-7: Example Asset Age Summary
∼ Figure 6-8: Example Asset Condition Summary
∼ Figure 6-9: Example Remaining Useful Life Summary
∼ Figure 6-10: Example Data Accuracy Summary
∼ Figure 6-11: Levels of service
∼ Figure 6-12: IDP Consultation Process
∼ Figure 6-13: Demand management options
∼ Figure 6-14: Infrastructure Enhancement Needs Driven by Future Demand Profile
∼ Figure 6-15: Asset Criticality Distribution
∼ Figure 6-16: Example of Life-cycle Budget Needs
∼ Figure 6-17: Investment decision process
∼ Figure 6-18: Levels of ODM
∼ Figure 6-19: DCF formula
∼ Figure 6-20: Financial decision indicators
∼ Figure 6-21: BCR in action
∼ Figure 6-22: Option A: Multi-criteria Analysis
∼ Figure 6-23: Option B: Multi-criteria Analysis
∼ Figure 6-24: Examples of sector level prioritization
∼ Figure 6-25: Scenario A: Base case to maintain existing service levels
∼ Figure 6-26: Scenario B: Moderate level of service improvements
∼ Figure 6-27: Determining unit cost for tariff setting purposes
∼ Figure 6-28: Total Asset Management Process (Source: IIMM)
∼ Figure 6-29: Scope of infrastructure management practices
∼ Figure 6-30: Improvement Process
∼ Table 1-1: Sector Specific Legislation
∼ Table 5-1: A 3-year process for developing a CMIP
∼ Table 5-2: Criteria for minimum requirements for a CMIP
∼ Table 6-1: Potential service document used in for preparing an IAM plan
∼ Table 6-2: Example of PPE sub-categories
∼ Table 6-3: Example Asset Hierarchy
∼ Table 6-4: Example Expected Useful Life of Assets
∼ Table 6-5: Generic Condition Grading
∼ Table 6-6: Condition Grading – Lined Channels
∼ Table 6-7: Data Accuracy
∼ Table 6-8: Consequence of Failure – generic
∼ Table 6-9: Criticality Grading
∼ Table 6-10: Example Water Service Standards
∼ Table 6-11: Example Road Transport Service Standards
∼ Table 6-12: Sanitation Service Standards
∼ Table 6-13: Example Stormwater Drainage Service Standards
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∼ Table 6-14: Example Solid Waste Service Standards
∼ Table 6-15: Example Electricity Service Standards
∼ Table 6-16: Example Parks Service Standards
∼ Table 6-17: Example Building Service Standards
∼ Table 6-18: Factors influencing Demand
∼ Table 6-19: Commonly Encountered Risks
∼ Table 6-20: Example Risk Consequence Rating – Network Level
∼ Table 6-21: Probability Rating- Network Level
∼ Table 6-22: Probability Rating- Asset Level (condition-based failure)
∼ Table 6-23: Risk Exposure Matrix
∼ Table 6-24: Life Cycle Cost Example
∼ Table 6-25: Practices scoring approach
∼ Table 6-26: Typical Milestones in Improvement of Asset Management – World Bank Advisory Note
∼ Table 6-27: Sample practices improvement project plan
∼ Table 6-28: Ranking of Improvement Needs
ANNEXURES
A. EXAMPLE - ASSET REGISTER
B. EXAMPLE - RISK REGISTER
C. EXAMPLE - UNIT RATES
D. EXAMPLE - O&M FORECASTS
E. CHECKLIST FOR CORE INFRASTRUCTURE ASSET MANAGEMENT PRACTICES
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DEFINITIONS
The following definitions are used in this document.
Accrual principle: Transactions and events that influence the financial position of an organisation must be
recognised when they occur and not when the cash resulting from the transaction or event is received or paid.
Asset: A resource controlled by a municipality as a result of past events and from which future economic benefits or
service potential is expected to flow to the municipality. GAMAP/GRAP requires a minimum level of detail that
separates items that have a difference in Expected Useful Life and are financially material. As a general guide, the
scope of asset can be determined by considering the extent that would be associated with any periodic renewal.
Asset Hierarchy: A framework for segmenting an asset base into appropriate classifications. The asset hierarchy can
be based on asset function, asset type, or a combination. GAMAP prescribes certain “categories” of assets (including
land, infrastructure, community assets, and other assets – which includes administration buildings and vehicles), and
each of these need to be broken down into asset “classes”.
Asset Management Team: A multi-disciplinary team appointed by the Municipal Manager to initiate, monitor and
review the asset management practices improvement program, the development of Infrastructure Asset Management
Plans and a Comprehensive Municipal Infrastructure Plan consistent with the municipality’s goals and objectives.
Asset Management: The process of decision-making, planning and control over the acquisition, use, safeguarding
and disposal of assets to maximize their service delivery potential and benefits, and to minimize their related risks
and costs over their entire life.
Asset Management Information System: A combination of processes, data and software applied to provide
outputs required for effective asset management.
Asset Performance: The performance of an asset that is measured in line with the applicable Level of Service.
Asset Register: A record of information on each asset that supports effective financial and technical management of
the assets, and meets statutory requirements.
Asset Utilisation: The extent to which an asset is being productively used – typically measured as a percentage of
its capacity.
Benefit-Cost Ratio: The sum of the present values of net benefits over a specified period of the asset or facility
divided by the sum of the present values of investment costs.
Capital Expenditure (CAPEX): Expenditure used to create new assets or to increase the capacity of existing assets
beyond their original design capacity or service potential. CAPEX increases the value of an asset.
Carrying Amount: The amount at which an asset is included in the statement of financial position after deducting
any accumulated depreciation and any impairment losses thereon.
Cashflow: The stream of costs and/or benefits over time resulting from a project investment or ownership of an
asset.
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Community Facilities: Discrete assets that provide a service directly to the community (such as parks, sports
facilities, cemeteries, landfill sites etc).
Components: Elements of an asset.
Comprehensive Municipal Infrastructure Plan: A plan that provides a holistic overview of existing service
performance, a vision of future performance scenarios, the risks, priorities, funding and tariff implications, as a
strategic input to the Integrated Development Planning process.
Critical Assets: Assets for which the consequences of failure are sufficiently severe to justify pro-active inspection,
maintenance and renewal. (“Important” Assets also justify pro-active inspection, maintenance and renewal, but not
to the same level as “Critical” Assets).
Current Replacement Cost: A measure of replacement value – the cost of replacing an existing asset with a
modern asset of equivalent capacity.
Debt Service Ratio: The ratio of interest and redemption payments on long-term loans to total income for the year.
Demand Management: Active intervention to change the pattern of demand for a service e.g. to minimise or
eliminate the need to upgrade assets, to address a limitation on bulk supply capacity, or minimise losses.
Depreciation: The wearing out, consumption or other loss of value of an asset whether arising from use, passing of
time or obsolescence through technological and market changes. It is accounted for by the allocation of the historical
cost (or re-valued amount) of the asset less its residual value over its useful life. GAMAP/GRAP: The systematic
allocation of the cost of an asset less its residual volume over its useful life.
Depreciable Amount: The cost of an asset, or another amount that replaces the cost price in the financial
statements, less its residual value.
Depreciated Replacement Cost: A measure of current value of an asset, based on its current replacement cost less
an allowance for deterioration of condition to date (based on the fraction of Remaining Useful Life/Expected Useful
Life).
Discounted Cash Flow: A method that converts cash flows over time to equivalent values at a given point in time.
Discount rate: A rate or factor that relates present and future monetary values.
Disposal: The actions required effectively dispose, decommission, or transfer assets in terms of legal or
organisational requirements.
Enhancement: Renewal and/or upgrading of an asset.
Expected Useful Life: The extent of life of an asset over which it can be expected to meet the required performance
given its operational environment (including parameters such as climate, soil conditions, topography, utilisation, and
operations and maintenance regime), and over which it will be productively used.
Expense: Loss in economic benefits during the accounting period in the form of outflows or depletions of assets or
incurrence of liabilities that result in decreases in equity, other than those relating to distributions to equity
participants (for example dividends).
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Infrastructure Assets: In this document, a broad interpretation of “infrastructure” is adopted – it includes all core
assets which are integral to the delivery of municipal services, including water supply, sanitation, road transport and
storm-water drainage, solid waste removal, electricity supply, and community facilities. In terms of GAMAP, it
includes all immovable Property, Plant and Equipment (PPE), as well as specific immovable assets such as vehicles
that are directly used in the delivery of the service (such as waste removal trucks). It excludes intangible assets
(such as licenses, software, etc.) and current assets (ones with a life less than 12 months, such as consumables).
Infrastructure Asset Management Plan: A plan developed for the management of Infrastructure Assets with the
aim of providing specified levels of service in a cost-effective manner, now and in the future. Multi-disciplinary
management techniques (including technical and financial) are combined to determine the aggregated asset life-cycle
needs. A significant component of the plan is a long-term cashflow.
Infrastructure Asset Management Policy: A formal statement adopted by Council that indicates the municipality’s
policy objective, the policy principles, and how these will be pursued (including the establishment of an IAM Team,
and aligned systems and planning).
Infrastructure Asset Management Strategy: A document that defines key IAM processes and targets including:
the definition of Consumer Groups and Service Catchments; Service Performance Standards and targets that
accommodate the municipality’s vision of future growth and demand; interaction and coordination measures; AMS
functionality and data standards; risk management processes; IAM practice improvement processes; a funding and
prioritisation strategy; and allocation of responsibility for implementation. Elements of the IAM Strategy may be
addressed initially in the first little iteration of the IAM Plans. A separate IAM Strategy document is likely to benefit
large municipalities in terms of alignment and coordination; and for any municipality with advanced AM practice, to
foster continuity of approach.
Internal Rate of Return: The discount rate at which the net present value is zero.
Investment Costs: The upfront capital investment costs as well as any subsequent cost to extend the useful life of
the asset improve its efficiency or increase its output.
Land: In this document, any reference to “land” is restricted to the land specifically required to accommodate
Infrastructure Assets.
Level of Service: The defined parameters that characterise essential service delivery requirements for a particular
service, against which performance may be measured. Criteria can relate to availability of the service,
quality/condition, quantity, reliability, responsiveness, environmental acceptability and financial implications.
Measures are identified for each criterion and used for performance monitoring and reporting and as a departure
point for risk management.
Liability: A present obligation of the enterprise arising from past events, the settlement of which is expected to
result in an outflow from the enterprise of resources embodying economic benefits or sacrifices of service potential.
Lifecycle: The cycle of activities that an asset goes through – including planning and design, initial acquisition and
construction, cycles of operation and maintenance and capital renewal, and finally disposal.
Maintenance: The actions required for an asset to achieve its expected useful life. Maintenance can be planned or
unplanned. Planned Maintenance includes measures to prevent known failure modes and can be time or condition-
based. Repairs are a form of unplanned maintenance to restore an asset to its previous condition after failure or
damage. Expenses on maintenance are considered operational expenditure.
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Municipal Administration Buildings: Buildings owned and used by the municipality for general management
purposes, and not directly associated with the delivery of a particular service (e.g. municipal offices and council
chambers).
Net Asset: A net asset represents the difference between assets and liabilities. Net assets are the amount that is set
aside in statutory funds, reserves, other reserves and accumulated surpluses and represents the wealth of the
municipality.
Net Benefits: The benefits less costs for a specified period.
Net Present Value: The value of an asset to an organization expressed in current monetary terms. It is calculated
as the net amount of discounted cash inflows arising from the use and subsequent disposal of the asset, less the
value of discounted cash outflows.
Operating Expenditure (OPEX): Expenditure necessary to provide services such as maintaining roads, providing
water and collection of waste. Examples of OPEX include staff costs, administration costs, consumables, maintenance
and repairs and feasibility studies.
Operations: The use of manpower and consumables (such as energy, chemicals and materials) required for an asset
to operate to the required performance.
Practices Improvement Plan - An action plan to improve the way infrastructure management is practiced in the
municipality, based on an assessment of existing and target practice, and focusing on management processes,
systems, data, and organisational arrangements. The initial Practices Improvement Plan may be prepared in the form
of a Business Plan to be driven on a program basis.
Recoverable amount: The amount the entity expects to recover from the future use of an asset, including residual
value on disposal.
Rehabilitation: Works to rebuild or replace parts of an asset to enable it to the original capacity and performance,
and materially extend its useful life (which may be a full or partial extension of life – i.e. less than its original
expected useful life).
Renewal: The replacement or rehabilitation of an asset. Expenses on renewal works are considered capital
expenditure.
Remaining Useful Life: The time remaining until an asset ceases to provide the required standard of performance
or economic usefulness.
Replacement: The complete replacement or reconstruction of an asset with one that performs to a similar standard
of performance, as a result of which the asset life can be considered to have re-commenced.
Residual value: The net amount which the entity expects to obtain for an asset at the end of its useful life after
deducting the expected costs of disposal.
Revenue: An increase in economic benefits during an accounting period through an enhancement of an asset or
through a decrease in a liability.
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Risk Management: The application of a formal process that identifies the exposure of a municipality to service
performance risk and determines appropriate responses.
Upgrading: The augmentation or alteration of an asset that results in a material improvement to capacity or
performance. Expenses on upgrading works are considered capital expenditure.
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ACRONYMS
The following acronyms are used in this document:
AM Asset Management
AMIS Asset Management Information System
AMP Asset Management Plan
AR Asset Register
ASB Accounting Standards Board
ASgiSA Accelerated and Shared Growth Initiative - South Africa
BCR Benefit-Cost Ratio
CAPEX Capital Expenditure
CMIP Comprehensive Municipal Infrastructure Plan
CRC Current Replacement Cost
DEAT Department of Environmental Affairs and Tourism
DCF Discounted Cashflow Analysis
DME Department of Minerals and Energy
DMP Disaster Management Plan
dplg Department of Provincial and Local Government
DOH Department of Housing
DRC Depreciated Replacement Cost
DSR Department of Sports and Recreation
DWAF Department of Water Affairs and Forestry
EIA Environmental Impact Assessment
EUL Expected Useful Life
GAMAP Generally Accepted Municipal Accounting Practice
GIAMA Government-wide Immovable Asset Management Act
GIS Geographical Information System
GRAP Generally Recognised Accounting Practice
HR Human Resources
HV High Voltage
IAM Infrastructure Asset Management – also referred to as Asset Management
IAMP Infrastructure Asset Management Plan
IAMS Infrastructure Asset Management Strategy
IDP Integrated Development Plan
IIMM International Infrastructure Management Manual
IMESA Institution of Municipal Engineering of Southern Africa
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IRR Internal Rate of Return
km kilometer
kVA Kilo Volt-Ampere (1000 Watts)
kw Kilowatt
MCA Multi-Criteria Analysis
MFMA Municipal Finance Management Act
MIG Municipal Infrastructure Grant
m Meter
m3 Cubic Meter
MTEF Medium Term Expenditure Framework
MV Medium Voltage
NAMS National Asset Management Steering Group (New Zealand)
NBR National Building Regulations
NPV Net Present Value
No. Number
ODM Optimised Decision Making
OHS Occupational Health and Safety
O&M Operations and Maintenance
pa Per Annum / year
PV Present Value
PMMS Pavement Maintenance Management System
RDP Reconstruction and Development Programme
RUL Remaining Useful Life
SALGA South African Local Government Association
SANS South African National Standards
SARTSM South African Road Traffic Signs Manual
SDBIP Service Delivery and Budget Implementation Plan
TSM Technical Services Manager
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LIST OF SYMBOLS
& And
c Cents
= Equals
÷ Divided by
> Greater than
< Less than
- Minus
x Multiplied by
/ or
% Percentage
+ Plus
± Plus or minus
R Rand
^ To the power of
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PREFACE
The objective of this document is to support improvement in the strategic management of municipal infrastructure
assets. A framework is described that will facilitate the preparation of sector-specific Infrastructure Asset
Management Plans (IAMPs) and the aggregation of these into a Comprehensive Municipal Infrastructure Management
Plan (CMIP). The processes aim to improve strategic and tactical planning of infrastructure, performance
management, risk management, financial management and capacity building, and are aligned with existing statutory
municipal processes.
Guidelines are provided on the core principles, methodology and basic techniques that can be adopted in compiling
both the IAMPs and CMIPs.
The document draws on the concepts and approach portrayed in the International Infrastructure Management Manual
(IIMM). The guidelines are an interpretation of the IIMM for application in South Africa, given the specific legislative,
institutional, financial and technical environment, and intend to strengthen baseline competence in the country.
Asset management requires a multidisciplinary approach, drawing on knowledge from disciplines such as the
management and social sciences, engineering and accounting. This Guideline has been developed with significant
inputs from the Office of the Accountant General. Municipal officials from different disciplines such as engineering,
finance and integrated development planning are encouraged to join hands in solving the complex asset management
challenges facing local government. The techniques described are appropriate for small local municipalities, though
the principles and approach are applicable more widely.
Document Layout
It is acknowledged that asset management, both locally and abroad, is an emerging science. This guideline will
hence be updated periodically to incorporate practical field lessons and international developments.
1. Introduction to Infrastructure Asset Management
2. Strategic Framework for Infrastructure Asset Management
5. Comprehensive Municipal Infrastructure Plan
3. Getting Started
4. Infrastructure Asset Management Plan
6. Basic Asset Management Toolkit
Setting the scene:What are IAMPs & CMIPS ● National challenges ● key AM concepts ● legal framework ● technical & accounting standards ● terminology
How to launch a sustainable IAM programme in a municipality:Proposed approach & framework ● enabling factors ● Typical AM team structure ● case studies ● critical success factors
Content of plan, how to prepare and minimum requirements:Approach ● minimum requirements ● document format ● methodology ● selecting the appropriate level of detail
Content of plan, linking to IDP process, how to prepare and minimum requirements:Purpose ● process ● format ● minimum requirements
Techniques for AM:Information & data collection ● asset knowledge ● LOS ● demand risk management ● life-cycle plan ● financial plan ● AM practices improvement plan ● AM plan adoption
The conceptual management framework and minimum compliance :Legislative drivers ● strategic IAM framework ● IAM policy ● purpose of IAMPs & CMIPs ● minimum requirements
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The guideline considers the management of infrastructure associated with the provision of the following services:
• Water Supply;
• Sanitation;
• Roads, Street Lighting, and Storm Water Drainage;
• Solid Waste Disposal;
• Electricity Supply; and
• Community Facilities and Administration Buildings.
The guideline contemplates the infrastructure required to support a service, now and into the future - including
upgrading, new construction, renewal of old infrastructure, and the operations and maintenance of current and new
infrastructure.
The guide will be of interest to:
• municipal management officials in all disciplines (finance, technical, corporate planning, and performance
management);
• councillors;
• national and provincial government departments that regulate, fund and capacitate municipalities in
infrastructure management; and
• those engaged in capacity support initiatives in municipalities.
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1. INTRODUCTION TO INFRASTRUCTURE ASSET MANAGEMEMT
This section of the guideline provides background to the topic of infrastructure asset management, citing challenges
being faced by municipalities, and key concepts that need to be pursued. The Comprehensive Municipal Infrastructure
Plan (CMIP) is introduced as a means of providing key inputs to the IDP process. A brief overview is given of the legal
framework, and technical and accounting standards. Lastly, the readers’ attention is drawn to the need to be careful of
the interpretation of words when reading and applying this guideline.
1.1 Background
Effective management of municipal infrastructure is central to municipalities providing an acceptable standard of
services to the community. Infrastructure impacts on the quality of our living environment and opportunities to
prosper.
Not only is there a requirement to be effective, but the manner in which municipalities discharge their responsibilities
as public entities is also important. Municipalities must demonstrate good governance and customer care, and the
processes adopted must be efficient and sustainable. Councillors and officials are custodians on behalf of the public of
infrastructure assets, the replacement value of which even in a small municipality, can amount to several hundred
million Rand, and in larger ones, to several billion Rand.
In recent decades, concerns over poor service performance (often only highlighted during high profile failure of
infrastructure) and unnecessary loss of asset value (arising from inadequate maintenance and capital renewal) has
driven governments across the globe to demand improvements in infrastructure management practice in the public
sector. Key themes of the latest generation of legislation introduced in this country relating to municipal
infrastructure management include:
• long-term sustainability and risk management;
• service delivery efficiency and improvement;
• performance monitoring and accountability;
• community interaction and transparent processes;
• priority development of minimum basic services for all; and
• the provision financial support from central government in addressing the needs of the poor.
Legislation has also entrenched the Integrated Development Plan (IDP) as the principal strategic planning mechanism
for municipalities. However, the IDP cannot be compiled in isolation – for the above objectives to be achieved, the
IDP needs to be informed by robust, relevant and holistic information relating to the management of the
municipality’s infrastructure.
There is a need to direct limited resources to address the most critical needs, to achieve a balance between
maintaining and renewing existing infrastructure whilst also addressing backlogs in basic services and facing ongoing
changes in demand. Making effective decisions on service delivery priorities requires a team effort, with inputs
provided by officials from a number of sections of the municipality, including infrastructure, community services,
financial, planning, and corporate services.
In line with international practice, these guidelines propose that an Infrastructure Asset Management Plan (IAMP) is
prepared for each sector (such as potable water, roads etc). These plans are used as inputs into the Comprehensive
Municipal Infrastructure Plan (CMIP) that presents an integrated plan for the municipality covering all infrastructures.
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The CMIP provides a capital works programme (new works, upgrading, and renewals) and operations and
maintenance strategies, risks and priorities, required budgets, funding arrangements and tariff implications now and
into the future, and how management practice can be improved. Figure 1-1 illustrates how the CMIP provides the
infrastructure inputs for the IDP.
Figure 1-1: Comprehensive Municipal Infrastructure Plans
COMPREHENSIVE MUNICIPAL INFRASTRUCTURE PLAN
5 year
10 – 20 years
10 – 20 years
INTEGRATED DEVELOPMENT PLAN
Roads and Stormwater
Services IAMP
Water Services
IAMP
Sanitation Services
IAMP
Waste Disposal Services
IAMP
Electricity Services
IAMP
Community Facilities and
Municipal Buildings
IAMP
CAPEX AND OPEX BUDGETS
The preparation of these plans will enable municipalities to:
• rank projects and determine budgets based on an holistic view of local needs and priorities;
• assess optimum funding arrangements; and
• demonstrate their ability to effectively manage and maintain infrastructure investments.
Benefits of this approach are:
• better communication;
• better coordination;
• better cooperation;
• better decision-making;
• better performance management; and
• better use of public funds.
1.2 National Challenges
As municipalities pursue the eradication of backlogs in basic services, concerns are emerging over the deterioration of
existing infrastructure and the sustainability of the new infrastructure being built. The problem is worst at
municipalities where revenues are under pressure due to either large indigent populations, poor debt collection
performance, or both.
The IDP establishes a 5 year program of projects using a process that is implementation-orientated and based on
stakeholder consultation. One of the main challenges in managing infrastructure is to balance the competing
demands for infrastructure construction, operations and maintenance, and renewal within each service, as well as
across the various municipal services. For the IDP to be effective in addressing these issues, it needs to be informed
by holistic and relevant information with a longer-term vision, say 10 to 20 years. Accordingly, strategic and tactical
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planning processes in municipalities need to be strengthened, supported by staged improvements to management
practices and organisational capacity that will translate to perceptible improvements to service delivery. These
interventions need to be structured to take account of the financial, skills and capacity constraints that exist at many
municipalities.
1.3 Key Asset Management Concepts
The leadership of a municipality needs to take some tough decisions on its service delivery priorities, enforcement
tactics, and tolerance to risk in shaping its vision. This process will be informed by political objectives, legal
compliance, and community consultation. The challenge to officials is to effectively communicate relevant and holistic
information to the decision-makers to inform this process. Asset management planning provides a sound framework
within which these decisions can take place.
The asset management objective is often stated as “to provide affordable levels of service that have been
agreed with customers in the most cost-effective way for present and future customers”. But what does
this really mean - what is asset management? Some people understand asset management (incorrectly) as being
just the maintenance of assets. Others say its ‘about having strategies for managing our assets throughout their
life’. Most people understand that asset management is the link between strategic and operational planning.
Figure 1-2 indicates the life-cycle of a single asset.
Figure 1-2: Lifecycle of an Asset
Planning
Disposal
Operations & Maintenance
Acquisition
Source : National Treasury
In the case of a network, there are a number of assets that are mutually inter-dependent for the provision of a
service, and the lifecycle needs of all the existing assets, as well as possible future extensions or upgrades, need to
be considered in an integrated fashion.
Figure 1-3 below shows the range of activities encompassed in ‘lifecycle asset management’. The asset manager is
concerned with planning activities around the asset lifecycle such as forecasting future level of service and demand
needs, analysing the gap between current capability of the assets and that needed to meet future demands, and
developing a works programme to close that gap.
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Figure 1-3: Lifecycle Asset Management (Network of Infrastructure Assets)
Assessing future service demand
Creation/acquisition
Operations
Condition/Performance Assessment
Upgrade
Renewal
Disposal
MaintenanceLIFECYCLE
ASSET MANAGEMENT
Source : IIMM Amended
If we explore the asset management objective statement further we can draw out some key concepts to enhance our
understanding of what asset management planning involves.
“affordable levels of service agreed with customers” implies that community involvement in decision making is an
important concept in asset management planning. Some asset management definitions replace the term ‘levels of
service’ with ‘outcomes’. This suggests that customers need to be involved not only with debating the specific service
outcomes required (e.g.: water quality standard) but with the other outcomes associated with providing the service –
outcomes on the environment and the broader community. The term “customers” is intended to be inclusive of the
community and any stakeholders with an interest in the service.
“in the most cost-effective way” introduces two other key concepts – that of lifecycle decision making and optimal
decision making. Lifecycle decision making means:
• That municipalities have strategies for managing assets across the lifecycle, i.e., not constructing them and then
ignoring them until they catastrophically fail.
• That the lifecycle strategies take into account critical assets and risk management, so that risks are identified
and steps are taken to manage these to minimise risk exposure over the asset lifecycle.
• That decisions are made on when to create, replace and upgrade assets considering the lowest lifecycle cost of
the asset, not just the cheapest construction cost.
Optimal decision making uses techniques to make decisions about the lowest lifecycle cost solution (as described
above) but also takes into account other outcomes associated with that decision – social, cultural and environmental
outcomes. Sometimes the lowest lifecycle cost is not always the best – sometimes municipalities may be prepared to
pay more to achieve a better environmental or social outcome. Optimal decision making isn’t just applied at an asset
level; the techniques are also used to prioritise projects at a sector and cross-sector level, to ensure the best
outcomes for the community for the least expenditure.
“for present and future customers” means that assets need to be managed in a way that the burden of cost does not
fall unfairly on one generation. It also means that there must be an understanding that the demand for services will
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change over time and brings in the important concepts of long-term and sustainable infrastructure
development and funding. These are complementary terms to the ones described above – good lifecycle
strategies, customer involvement in affordable outcomes, and optimal decision making will ensure that the service
can be sustained into the future without adverse outcomes in other areas.
1.4 International Infrastructure Management Manual
The International Infrastructure Management Manual (IIMM) documents good practice in municipal infrastructure
management, developed in New Zealand and Australia. In its Strategic Asset Management Advisory Note (1999), the
World Bank recognised the management of municipal infrastructure practiced in these countries to be representative
of world best practice.
The challenges facing South Africa are not unique - the IIMM was prepared in response to a number of global
realities: the vast investment made in infrastructure in municipalities; the traditional focus on creation of new
infrastructure rather than long term maintenance and renewal; the major benefits to be gained in living standards,
cost efficiency, health and safety, and sustainability by improved practice; and a growing number of well-publicised
infrastructure failures.
The manual provides guidance on life-cycle planning, systems, failure mode analysis (e.g. capacity, condition, cost,
and service performance), risk management, and prioritisation (amongst others). Version 3 includes inputs from
across the globe and was launched in South Africa in 2006 with endorsement by dplg, SALGA and IMESA. These
guidelines expand on the frameworks and processes in the IIMM to provide specific guidance relevant to South
African municipalities.
1.5 Legislative Framework
1.5.1 Constitution
The Constitution indicates the following objectives of local government:
• provide democratic and accountable government for local communities;
• ensure the provision of services to the community in a sustainable manner;
• promote social and economic development;
• promote a safe and healthy environment; and
• encourage the involvement of communities and community organisations in the matters of local government.
The Constitution however cites an important caveat: municipalities should strive for the above objectives within their
financial and administrative capacity. This highlights capacitating of municipalities as a fundamental and core need
and places responsibility on all spheres of government to promote, monitor and support the building of such capacity.
1.5.2 Over-arching Legislation
Figure 1.4 indicates the suite of local government specific legislation. Municipalities must also comply with sector
specific and cross-cutting legislation.
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Figure 1-4: Local Government Specific Legislation
CONSTITUTION
MUNICIPAL SYSTEMS ACT
MUNICIPAL STRUCTURES
ACT
MUNICIPAL FINANCE
MANAGEMENT ACT
DIVISION OF REVENUE ACT
MUNICIPAL PROPERTY RATES ACT
° Rights, duties, authority
° Core processes
° Functions & powers
° Systems & structures
° Financial management
° Equitable share
° Grants
° Sustainable revenue
OTHERS
° Sector and spatial planning
° Standards
1.5.3 Strategic Planning
The Municipal Systems Act establishes the IDP of a municipality is the principal strategic planning instrument that
guides and informs all planning and development, and all decisions with regard to the planning, management and
development in the municipality. It links, integrates, and coordinates all municipal plans into a single strategic plan
for the development of the municipality. It provides a basis for determining the level and extent of municipal
resources and capacity required, and for formulating budgets.
Every municipal council has to approve an annual municipal budget that includes provision for capital expenditure on
projects over not more than 3 years. In terms of the Municipal Systems Act, the Council must also approve a
financial plan linked to an IDP that is prepared for a period of 5 years (an updated annually).
The preparation of an IDP is a legal requirement, and in terms of the Municipal Systems Act, it must include the
following:
• the municipal council’s long-term development vision;
• the existing level of development, identifying communities that do not have access to basic municipal services;
• the municipal council’s development priorities and objectives for its elected term, including its local economic
development aims and its internal transformation needs;
• the municipal council’s development strategies which must be aligned with any national or provincial sectoral
plans and planning requirements binding on the municipality in terms of legislation;
• a spatial development framework which includes the provision of basic guidelines for a land use management
system for the municipality;
• the council’s operational strategies;
• applicable disaster management plans;
• a financial plan, which must include a budget projection for at least the next three years; and
• the key performance indicators and performance targets.
The Municipal Systems Act (section 78 & 79 processes) deals with infrastructure investment planning in the sense
that the cost of ownership must be known and appropriate delivery strategies identified and implemented. dplg,
which is the custodian of this Act, views the preparation of a CMIP as a key mechanism to achieve this end.
1.5.4 Occupational Health and Safety
The Occupational Health and Safety Act (85 of 1993, Construction Regulations) requires the owner of any “structure”
(including municipal infrastructure such as bridges, waterworks, reservoirs, buildings, drainage works and roads) to
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maintain such structure in such a manner that “the structure remains safe for continued use and such maintenance
records shall be kept and made available to an inspector upon request.”
1.5.5 Sector-Specific Legislation
Municipalities must also comply with sector specific legislation, indicated in table 1-1:
Table 1-1: Sector Specific Legislation
Sector Legislation
Water Services Act, 1997 (Act No. 108 of 1997) Water and Sanitation
National Water Act, 1998 (Act No. 108 of 1998)
Electricity Act, 1987 (Act No. 41 of 1987) Electricity
Electricity Distribution Industry Restructuring Bill, 2003
National Land Transport Transition Act, 2000 (Act No. 22 of 2000) Roads and
Storm- water Urban Transport Act, 1977 (Act No. 78 of 1977)
National Environmental Management Act, 1998 (Act No. 107 of 1998) Waste Management
Environment Conservation Act, 1989 (Act No. 73 of 1989)
1.5.6 Asset Management
In recent years, government policy has increasingly focussed on the need to balance the delivery new of
infrastructure in the short term, with the need to strive for sustainability. National Treasury has prepared Asset
Management Framework for national and provincial spheres of government that largely focuses on movable assets.
More recently, the Department of Public Works produced the Government-wide Immovable Asset Management Act
(currently a Bill – to be enacted shortly). GIAMA prescribes the need for public entities to prepare Asset Management
Plans for immovable assets – though this is focussed on accommodation (building and land).
1.6 Technical Norms and Standards
National norms and standards have been regulated in terms of the Water Services Act for the provision of basic water
supply and sanitation services, potable water quality, metering and flow control, and eradication of bucket toilets.
DEAT and DSR are preparing norms and standards for refuse removal and sports and recreation facilities
respectively. Environmental standards (in terms of the National Environmental Management Act) are being enforced
by DEAT through an EIA approval process.
Construction standards and codes of practice have been published (SANS) in line with the National Building
Regulations.
In recognition of the substantially different technical circumstances that can apply to planning, design and
implementation of municipal infrastructure, a number of technical guidelines have been published in recent years to
promote the use of “appropriate technology” that responds to local needs (such as development density, topography,
climate, and ground conditions). The Guidelines for Human Settlement Planning and Design (known as the “Red
Book”) was compiled under the patronage of the Department of Housing as a result of collaboration of several
government departments, universities, and the private sector, and is widely used.
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Funding agents have adopted guidelines as a basis for the allocation of grants and subsidies (such as MIG, DOH, and
DME). The MIG “Guide on Basic Levels of Service” provides broad guidance on norms for the provision of basic
infrastructure, as follows:
• there is no national policy that defines the minimum level of service for residential roads, though the MIIF refers
to a minimum of an “all weather access to within 500 m of the dwelling”;
• streetlights should be provided at a rate of one for every four stands (or high masts for dense settlements);
• solid waste has to be removed at least once a week;
• norms are provided for the provision of community facilities such as health centres, mortuaries, community
centres, parks, beaches, cemeteries, crematoriums, fencing, abattoirs, libraries, facilities for animals, street
trading or market facilities, and social institutions.
DME funds the provision of electricity infrastructure for about 0.6 kVA per household.
Some municipalities have adopted their own standards, based on local needs, and in some cases consider it
appropriate to use their own funds to supplement grant or subsidy allocations, to increase the level of basic service,
particularly in urban areas.
1.7 Accounting Standards
There is a transition in the accounting standards that apply to municipalities. In line with international practice, the
MFMA requires municipalities to comply with the Standards of Generally Recognised Accounting Practice (GRAP). The
Accounting Standards Board has approved a number of Standards of Generally Accepted Municipal Accounting
Practice (GAMAP) as an interim solution specifically municipalities until such time that they are replaced with a
relevant GRAP standard. The standard that is applicable to Infrastructure Assets (as defined in this document) is
GAMAP 17.
The changes represent a shift from an “historic cost” to an “accrual” basis of accounting. Key changes include the
recognition of depreciation of assets as an expense, and grants as revenue. A Government Grants Reserve and an
External Financing Fund are established as well as a Capital Replacement Reserve (for future acquisition of assets).
The deadline for municipalities to adopt the new standards ranges from the year ended June 2006 to June 2008
(depending on National Treasury’s assessment of the capacity of the municipality). National Treasury encourages a
pragmatic approach to the transition, but notes the need to balance this with the need to produce accurate financial
statements.
Assets will need to be separately identifiable in the Immovable Asset Registers of municipalities in order to be able to
depreciate them in terms of the new standards. All their assets will need to be recognised and classified into groups
for disclosure in the financial statements, and their “fair value” determined (municipalities are permitted to use a
“cost” basis as an interim arrangement). Most municipalities will therefore need to embark on a process to convert
existing globular amounts into separate line items, and GAMAP 17 requires this to be done within 3 years of adoption
of the new standard. Fair value can be based on market value where this can reasonably be established, such as for
land and office buildings, but infrastructure and specialised municipal buildings will usually be assessed using a
depreciated replacement cost approach (this concept is explained later in the guideline).
National Treasury indicates that infrastructure assets will need to be re-valued on a regular basis (the Accounting
Standards Board suggests every 3 to 5 years).
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1.8 Terminology
Words can be interpreted by people in many different ways, even when English is their first language. It is necessary
therefore for users of the guideline to acquaint themselves with the definitions adopted for this particular document
by referring to the “Definitions” section. The following summarises the intent of some of the key terms used:
Customers The term is used in this document to refer to ALL persons involved directly or indirectly in the
service – it includes the broader community, consumers and stakeholders.
Level of
Service
The “level” of service is sometimes characterised by a singular measure of the availability of that
service (e.g. KVA of electricity supply, gravel roads and tarred taxi routes, refuse collection
frequency etc), and “standards” of service are regarded as additional qualitative measures (e.g.
water quality, down time etc). Effectively, both the level and standard of service are performance
criteria and should be integrated as an essential part of the municipality’s performance
management system. In this document, the term “Level of Service” embraces ALL the
performance criteria (i.e. both “availability” and “qualitative” aspects).
Infrastructure The term is used in this document not only to refer to civil and electrical infrastructure, but also
community facilities such as sports fields, parks and cemeteries (and refuse removal vehicles –
as an essential requirement for the waste disposal service).
Infrastructure
Asset
Management
This is a strategic planning exercise that assesses the need for the construction of new assets,
and upgrading, renewals, operations and maintenance, and disposal of assets over a period of 10
to 20 years.
Renewal and
Maintenance
The term “Renewal” is reserved for use only when the expected useful life of an asset is
extended (and then it is also considered a capital cost. “Maintenance” is different to Renewal – it
is the work that has to be done for an asset to achieve its expected useful life and is an
operational expense. Figure 1-5 provides an overview of the terms.
Figure 1-5: Overview of the Definition of IAM Expenditure Categories
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2. STRATEGIC FRAMEWORK FOR INFRASTRUCTURE ASSET MANAGEMENT
This section of the guideline describes the organisational framework that needs to be assembled to drive improvement
in infrastructure asset management in an effective and sustainable manner.
2.1 Introduction
Section one of this guideline indicates the key benefits that can be derived from adoption of improved infrastructure
asset management practice. Certainly the staged introduction of techniques that have been tried and tested
internationally has the potential to add tremendous value in a range of management areas, as follows:
• Strategic Planning - by providing improved information into the IDP process on current levels of service, risks
and future demand, costed strategic options with tariff implications, and coordinated programs;
• Performance Management – by determining more effective and holistic criteria and measures for service delivery,
and applying these consistently to monitoring, reporting, and risk management;
• Risk Management – by introducing a focus on assessing service delivery risk at network and asset level, and
identifying appropriate responses;
• Financial Management – by determining budget needs based on defined levels of service now and in the future,
assessing long-term affordability to the municipality, identifying tariff implications, and establishing realistic
valuation of the infrastructure assets;
• Capacity Building – by crafting prioritised interventions to steadily improve asset management practice.
The approach to implementing the improvements needs to be such that it is manageable for each municipality. The
tempo and extent will be dictated by factors such as senior management buy-in, political will, the nature of existing
processes, and capacity.
2.2 Legislative Drivers for the Asset Management Framework
The Municipal Systems Act (MSA) clearly indicates that municipalities must strive to ensure that municipal services
are provided to local communities in a financially sustainable manner (including the maintenance, repair and
replacement of physical assets) (sections 1 and 4 of the Act). This has to be achieved through prudent, economic,
efficient and effective use of available resources, within each municipality’s financial and administrative capacity. The
Act also encourages regular review of its practice to achieve improvement in service quality (section 73 of the Act).
The Integrated Development Plan (IDP) is stipulated (in section 35 of the Act) as the “principal strategic planning
instrument that guides and informs all decisions with regard to the planning, management and development in the
municipality” – however, as noted above, it cannot be effectively prepared in the absence of relevant and holistic
information.
The Municipal Finance Management Act (MFMA) encourages sustainable and sound financial management of
municipalities. It emphasises the need to allocate resources in line with strategic priorities and to link plans and
budgets to achieving the long term goals of the municipality (section 21 of the Act). It highlights the need to
maintain assets to the extent necessary (section 78) and to be realistic about future expenditure and revenues
(section 21 of the Act). A performance management culture is promoted by advocating a continuous cycle of
forecasting, implementation and review, and the introduction of an obligation to prepare and publicly report against a
Service Delivery and Budget Implementation Plan (SDBIP) (section 53 of the Act).
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The Municipal Manager is given not only the responsibility to deliver specific outputs that must be consistent with the
budget and the SDBIP, but also the authority to run the operations subject to clear statements of procedure
approved by Council. This, together with the Municipal Systems Act requirement (section 11 of the Act) for
municipalities to exercise their legislative or executive authority by developing and adopting policies, plans, strategies
and programmes, provides a compelling argument for municipalities to establish a policy and strategy framework that
addresses the financial, technical, risk, and performance management of infrastructure in a coherent fashion.
2.3 Infrastructure Asset Management Framework
These guidelines propose a framework as illustrated in figure 2-1, which includes the following key asset
management documents and systems:-
• A policy statement which provides the over-arching principles and organisational objectives for managing the
municipality’s infrastructure to give effect to its vision.
• An asset management strategy which indicates the processes the organisation will use to put the policy into
effect, providing specific criteria, measures and goals (which logically should be aligned with the performance
management system of the municipality). The strategy should also indicate the approach to be taken to manage
risk, and the municipality’s appetite for risk (alternatively this could be addressed in a separate corporate risk
management strategy). When commencing with a process of IAM, a municipality may not have sufficient
information to prepare a strategy – in this case, a municipality may elect to commence with the preparation and
updating of Infrastructure Asset Management Plans until sufficient information is available to prepare a strategy.
• An Infrastructure Asset Management Plan (IAMP) which sets out the sector needs and priorities, levels of service,
future demand, capital works and O&M programmes and strategies, and funding plans. This plan will be updated
on an annual basis.
• A Comprehensive Municipal Infrastructure Plan (CMIP) which considers cross-sector priorities and issues, and
presents a holistic long term plan for the municipality’s infrastructure assets. This plan will be updated on an
annual basis, and will be integrated with other management strategies and plans, such as Human Resources,
Information Systems and Finances.
• The IAM planning process needs to be informed by relevant information on existing infrastructure and future
needs, and this will normally be provided by an IAM System. Day-to-day operations (such as the management of
capital programs and O&M) would be managed in line with the policy, strategy and plan, guided by operational
systems (such as maintenance works).
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Figure 2-1: Strategic Infrastructure Asset Management Framework
Development Vision and
Objectives
IAM Policy
Implementation
CMIP &IAM Plans
IAM System
IAM Strategy
Vision, mission, values, strategic objectives
Over-arching principles, organisational commitment to
improvement
Performance criteria, measures and targets, funding plan,
aligned processes and systems support
Status, tactics, short, medium, long term plan
Capital Programs, O&M Manuals
2.4 Infrastructure Asset Management Policy
Most municipalities have an over-arching financial policy to deal with the financial management of both the movable
and immovable assets (An Immovable Assets Financial Policy). This can be supported by an Infrastructure Asset
Management (IAM) Policy which focuses specifically on the management of infrastructure assets. This focus is
justified in view of the critical importance of infrastructure assets to service delivery, their substantial value, and
relatively long expected lives. The IAM policies specifies will specify the municipality’s policy principles (such as
effective governance, sustainable service delivery, social and economic development, custodianship, cost
effectiveness and efficiency, and transparency) and indicates how the municipality will give effect to these
management principles through such measures as the preparation of IAM Strategies and Plans. An Immovable Asset
Control Procedures document would describe the procedures to be adopted in day-to-day management of assets to
exercise proper control, safe-guarding, and updating of information in the asset register. The arrangement is
summarised in figure 2-2.
Figure 2-2: Policy and Strategic Framework
Immovable Assets Financial Policy
Infrastructure Asset Management (IAM) Policy
Immovable Assets Control Procedures
Infrastructure Asset Management (IAM) Strategy
Infrastructure Asset Management (IAM) Plan
Infrastructure O&M Plan
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An example of an IAM Policy is presented below.
CASE STUDY – INFRASTRUCTURE ASSET MANAGEMENT POLICY
Policy Objective
The Municipality is committed to providing municipal services for which the Municipality is responsible, at an
appropriate level, and in a transparent, accountable and sustainable manner, according to certain core principles.
Policy Principles
The following policy principles, presented in no particular order, serve as a framework for the achievement of the
policy objective stated above.
Effective Governance
The Municipality strives to apply effective governance systems to provide for consistent asset management and
maintenance planning in adherence to and compliance with all applicable legislation to ensure that asset
management is conducted properly, and municipal services are provided as expected.
To this end, the Municipality will:
• continue to adhere to all constitutional, safety, health, systems, financial and asset-related legislation;
• regularly review and update amendments to the above legislation;
• review and update its current policies and by-laws to ensure compliance with the requirements of prevailing
legislation; and
• effectively apply legislation for the benefit of the community.
Sustainable Service Delivery
The Municipality strives to provide to its customers services that are technically, environmentally and financially
sustainable. To this end, the Municipality will:
• identify a suite of levels and standards of service that conform with statutory requirements and rules for their
application based on long-term affordability to the Municipality;
• identify technical and functional performance criteria and measures, and establish a commensurate monitoring
and evaluation system;
• identify current and future demand for services, and demand management strategies;
• set time-based targets for service delivery that reflect the need to newly construct, upgrade, renew, and dispose
infrastructure assets, where applicable in line with national targets;
• apply a risk management process to identify service delivery risks at asset level and appropriate responses;
• prepare and adopt a maintenance strategy and plan to support the achievement of the required performance;
• allocate budgets based on long-term financial forecasts that take cognisance of the full life-cycle needs of
existing and future infrastructure assets and the risks to achieving the adopted performance targets;
• strive for alignment of the financial statements with the actual service delivery potential of the infrastructure
assets; and
• implement its tariff and credit control and debt collection policies to sustain and protect the affordability of
services by the community.
Social and Economic Development
The Municipality strives to promote social and economic development in its municipal area by means of delivering
municipal services in a manner that meet the needs of the various customer user-groups in the community. To this
end, the Municipality will:
• regularly review its understanding of customer needs and expectations through effective consultation processes
covering all service areas;
• implement changes to services in response to changing customer needs and expectations where appropriate;
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• foster the appropriate use of services through the provision of clear and appropriate information;
• ensure services are managed to deliver the agreed levels and standards; and
• create job opportunities and promote skills development in support of the national EPWP.
Custodianship
The Municipality strives to be a responsible custodian and guardian of the community’s assets for current and future
generations.
To this end, the Municipality will:
• establish a spatial development framework in consultation with the local municipalities that takes cognisance of
the affordability to the municipality of various development scenarios;
• establish appropriate development control measures in consultation with the local municipalities including
community information;
• cultivate an attitude of responsible utilisation and maintenance of its assets, in partnership with the community;
• ensure that heritage resources are identified and protected; and
• a long-term view is taken into account in infrastructure asset management decisions.
Transparency
The Municipality strives to manage its infrastructure assets in a manner that is transparent to all its customers, both
now and in the future. To this end, the Municipality will:
• develop and maintain a culture of regular consultation with the community with regard to its management of
infrastructure in support of service delivery;
• clearly communicate its service delivery plan and actual performance through its Service Delivery and Budget
Implementation Plan (SDBIP);
• avail asset management information on a ward basis; and
• continuously develop the skills of councilors and officials to effectively communicate with the community with
regard to service levels and standards.
Cost-effectiveness and Efficiency
The Municipality strives to manage its infrastructure assets in an efficient and effective manner. To this end, the
Municipality will:
• assess life-cycle options for proposed new infrastructure in line with the Supply Chain Management Policy;
• regularly review the actual extent, nature, utilisation, criticality, performance and condition of infrastructure
assets to optimise planning and implementation works;
• assess and implement the most appropriate maintenance of infrastructure assets to achieve the required
network performance standards and to achieve the expected useful life of infrastructure assets;
• continue to secure and optimally utilise governmental grants in support of the provision of free basic services;
• implement new and upgrading construction projects to maximise the utilisation of budgeted funds;
• ensure the proper utilisation and maintenance of existing assets;
• establish and implement demand management plans;
• timeously renew infrastructure assets based on capacity, performance, risk exposure, and cost;
• timeously dispose of infrastructure assets that are no longer in use;
• review management and delivery capacity, and procure external support as necessary;
• establish documented processes, systems and data to support effective life-cycle infrastructure asset
management;
• strive to establish a staff contingent with the required skills and capacity, and procure external support as
necessary; and
• conduct regular and independent assessments to support continuous improvement of infrastructure asset
management practice.
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Policy Implementation
The Municipality will develop, adopt and periodically review an Infrastructure Asset Management Strategy (IAMS) that
will clearly communicate long-term infrastructure asset management performance goals, broad implementation
strategies and responsibilities and will be consistent with the infrastructure asset management policy and the
Municipality’s vision, mission and strategic objectives. To this end, the Municipality will:
• develop and periodically update an Infrastructure Asset Management Plan (IAMP) for each service network that
will portray the lifecycle plan to meet the performance goals stated in the IAMS;
• develop and maintain an Infrastructure Asset Register;
• prepare and periodically update a Maintenance Strategy and Plan;
• strive to align strategic asset management processes with the Fixed Asset Financial Policy;
• manage levels and standards of service;
• prepare network development plans;
• build capacity and motivate allocation of sufficient budgets; and
• monitor performance at network and asset level.
Courtesy of Capricorn District Municipality
2.5 Asset Management Strategy
An IAM Strategy addresses issues such as the following, as appropriate to the capacity, functions, and practice of the
municipality:
• defines Customer Groups and Service Areas;
• defines criteria and measures for the levels and standards of service for each network
• records existing (baseline) levels and standards of service;
• states a policy on target levels and standards of service based on an assessment of long term affordability to the
municipality;
• charts a course for the development of infrastructure in line with the entity’s vision;
• defines a process where targets are set each year and reflected in the SDBIP;
• defines a funding strategy;
• defines the project prioritisation and budget allocation process;
• defines key infrastructure management processes and standardized procedures including:
∼ the establishment and ongoing maintenance of an Infrastructure Asset Register;
∼ the preparation of an IAMP for each network, and the update period; and
∼ the preparation of an Operations and Maintenance Plan for each network;
• requires the preparation of an comprehensive municipal infrastructure plan each year to inform the IDP;
• defines coordination measures for infrastructure planning and implementation;
• describes the functionality of a central infrastructure asset management system (AMS), and define data
standards;
• indicates the principles of the accounting treatment of infrastructure assets and the linkages of the AMS to the
financial system;
• defines the process to be adopted in managing physical risk of networks and the entity’s risk appetite;
• commits to a process of continuous improvement of infrastructure management and planning practice and states
the methodology to be used; and
• allocates responsibility for infrastructure asset management to specific individuals.
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2.6 Infrastructure Asset Management Plans
An Infrastructure Asset Management Plan should:
• document the nature, extent, age, utilisation, condition, performance and value of the infrastructure network;
• identify existing and proposed levels of service to be achieved over the report period (minimum 10 years), as
well as the expected changes in demand;
• outline the strategies of how the gap in the levels of service will be met through a combination of demand
management (non-asset solutions) and asset lifecycle management tactics (development, renewal, operations
and maintenance and any disposal) over the planning period;
• introduce a risk management process;
• assess capital and operational budget needs and funding implications; and
• assess the prevailing infrastructure asset management practice and identify improvements.
The plan should support the development vision of the municipality and facilitate prudent technical and financial
decision-making. The plan will also demonstrate to funding agents and other stakeholders the municipality’s ability
to effectively manage its existing and proposed new infrastructure. The plan draws on available sector plans and the
latest IDP, and in turn, should be used to inform updates of these documents. The IAMP should be updated,
extended and improved in each subsequent version as part of the municipality’s commitment to a service driven
culture and the pursuit of continuous improvement.
The first IAMP(s) will typically be based on existing data and information – a main component of which should be
derived from the asset register. It is important therefore that when establishing an infrastructure asset register for
compliance with the MFMA, that due consideration be given to collecting data that will be required for asset
management planning (as detailed in section 6.1). When preparing the first plans, the absence of detailed
information must not delay the process – assumptions must be made, and duly noted in the plan. The need for
improved data or information would form part of the recommendations on improvements to be made before the next
iteration of the plan (and the benefits and cost of obtaining such information assessed).
Section 4 provides further information on the scope and content of an IAMP and the process for developing the plan.
2.7 Comprehensive Municipal Infrastructure Plan
In these guidelines it is proposed that municipalities draw their IAMPs together into one consolidated plan, called the
Comprehensive Municipal Infrastructure Management Plan (CMIP). The CMIP will contain summarised key
information from the IAMPs and will provide the core infrastructure inputs to the IDP.
There are several reasons for consolidating the IAMPs into one summarised document. Firstly the CMIP will provide a
big picture view of the state of infrastructure in the municipality and the key issues and strategic options. It is
difficult to make level of service and funding decisions on one sector in isolation from the others – small level of
service improvements may seem affordable until they are all added together, and the need for cross subsidisation is
able to be effectively considered. The CMIP also provides an opportunity to demonstrate that the municipality is
considering the priorities for infrastructure development between sectors as well as within sectors for example the
opportunity to review whether limited funds may be better spent upgrading water treatment plants versus building a
new library.
Section 5 provides further information on the scope and content of a CMIP and the process for developing the plan.
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2.8 Minimum Requirements
The minimum requirements are indicated in Table 2.1.
Table 2-1: Responsibilities of Municipalities
Element Requirement Tips
IAM Policy Council to adopt within 2 years. • Commit to an implementation approach
that is in line with the capacity of the
municipality
IAM Strategy Optional as a separate document. • Do this once the IAM practices are
mature
IAMPs IAMP for all sectors adopted by Council within 1
year (or IAMP scope covered in sector plan e.g.
WSDP). Update each at least every 2 years.
• Try one IAMP first, then expand to other
sectors
CMIP First CMIP adopted by Council within 2 years.
CMIPs summarise key information and strategic
issues across all sectors (consistent with
information indicated in the sector IAMPs).
Update annually.
• All the IAMPs need to be completed first,
even at a high level
• CMIP needs to be brief and in a format
that is understandable to non-technical
people.
2.9 Summary
The adoption of an IAM policy will reflect organisational buy-in and a commitment to improve this area of the
municipality’s responsibilities, which is central to service delivery. Whilst it is not necessarily a pre-requisite to
implementing improvements, it entrenches the good asset management as an underlying theme of wide range of
management activities, and a common focus for technical, financial and planning within the municipality. The
formulation of specific strategies may evolve over time as asset management practice matures, or may be useful in
larger municipalities to steer a re-alignment of business practices. Guidance is provided on the content of such a
policy and strategy, which can be interpreted for application at each municipality. The preparation of Infrastructure
Asset Management Plans (IAMPs) for each service must be a key element of giving effect to the policy, and these
need to be pulled together into a Comprehensive Municipal Infrastructure Plan (CMIP) to provide important input to
the IDP process.
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3. GETTING STARTED
This section of the guideline contemplates how to begin to change how infrastructure is managed in the municipality.
3.1 Approaches to Starting Out
To date municipalities have adopted infrastructure asset management practices for different reasons, some of which
include:
• the need to comply with legislation such as the MFMA and GAMAP 17 (asset registers, asset valuation and
depreciation);
• responding to qualified audited financial statements;
• reacting to a visible deterioration in the condition of infrastructure and service delivery failures;
• the need for robust planning in response to possible exponential economic growth; or
• the pursuit of excellence in infrastructure management.
Similarly, where a municipality starts with asset management depends on its existing situation and specific local
needs. The following figure shows a tried-and-proven approach to a sustainable asset management programme.
Figure 3-1: Getting started with an asset management programme
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3.2 Setting up the Enablers
As discussed above, there is no one right way to start out, however there are some essential things that must be
done early on in the process. The following are essential initial activities:
• securing senior management buy-in (which may require the initial preparation of a scoping document or business
plan outlining what is proposed and why – section 1 of this document will provide some useful input here as to
legislative drivers and benefits of AM planning);
• establishing an asset management team with representation across the municipality to steer the overall program
(a typical team structure is illustrated in figure 3-2 below)
• allocating responsibility for overall coordination and supporting staff with dedicated time allocated for them to
carry out this work; and
• awareness-raising and training; training particularly for staff who will be involved in undertaking AM planning
and/or providing inputs to the plan.
Figure 3-2: Typical Asset Management Team Structure
AM SPONSOR
Corporate Support Services
Manager
Community Development
Services Manager
1
AM CONVENER2
Technical Services Manager
Chief Financial Officer IDP Manager Internal Auditor3
1. Preferably Mayor of Municipal Manager2. Rotating position between members of the Asset Management Team3. Functional specialist in that department tasked with AM
Then the focus should be on the following:
• ‘taking stock’ of the current situation, available information, existing processes, other planning documents, etc.
Some municipalities may find that it is best to simply start with preparing an IAMP in skeleton form, populating it
with existing information and known facts (sometimes just from staff) - this process in itself is useful for
identifying gaps that need to be filled before a more complete IAMP can be prepared and therefore can be one
input into preparing an AM strategy; and
• preparation of the IAM policy and strategy which will give staff some guidance as to the overall AM goals that the
municipality wishes to achieve, and the strategy for achieving those goals (refer to section2).
And once there is a clear way forward, the municipality may then consider:
• identifying future data needs and data collection and capture into an Asset Register (being pursued by many
municipalities driven by the need for MFMA compliance);
• determination of functional needs for the Asset Management System (AMS) (if this has been agreed as an initial
priority) and its establishment, and preparation of a Data Management Plan.
• preparation of the first round of completed Infrastructure Asset Management Plans; and
• preparation of a Business Plan that sets out the whole process, along the lines indicated in figure 3-3, and
implementation on a program basis.
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Figure 3-3: Example Roadmap for Establishing a Comprehensive IAM System for a Large Municipality
Initial AM Improvement Plan or Business Plan for AM Establishment
Senior Management Buy-in
Awareness Raising & Training
• AR format, scope
• Define AM processes (aligned across sectors)
• Define system functionality
AM Policy
Growth & DevtStrategy
AM Strategy (incl. LOS/SOS, geographic hierarchy, customer
groups, risk management, affordability etc.)
Establish AM System (common)
Update data in AMS
Future demand incl. demand risk, demand
management
Life-cycle plans (new, upgrade, renewal, O&M)
10-20 yr budget forecast, priorities, risks
Management Practice Improv ement Plan
IDP
Financial PolicyEstablish AM Team
PMS (& SDBIP)
Infrastructure Investment Policy
Selectiv e improv ement of asset data
IDP Process – lock-in of budgets
CMIP INTEGRATION
• Affordability
• Risks
• Priorities
Political decision-making,
priorities, leadership
Monitoring plan
Supports
Feedback Business Plan
Improvement cycle
• SDF
• Network plans
• Housing and backlog studies
• Existing 3 year budget forecast
• Network Plans
• O&M Plan
• Housing Plan
• (Risk plan)
ODM
Reports, (deterioration, modelling, risk)
Linkages e.g. PM, financial, O&M
etc.
INFRASTRUCTURE AM PLAN (IAMP) LOS/SOS Assessment
Budg
ets
The following is a case study of how asset management has been approached in a municipality in Limpopo.
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Figure 3-4: Case study: How the Lephalale Municipality Approached Asset Management
IAM training
Establishment of IARs for urban water
and sanitation networks
Development of IAMPs for water and
sanitation (urban areas)
Timeline Initiative Actions
2004DPLG/EU funded
intiative to establish AM in municipalities
Establishment of corporate AM
team
Management discussion and presentation to
Council
Council resolution empowering the AM
team2005
2005 -
2006
Commence with AM, with water services as the
pilot domain
Appoint service provider to assist with asset
management improvement programme
Updating of water IAR and IAMP
(include rural areas)
Establish risk & performance management frameworks
Establish corporate asset management
policy
IAM practices improvement plan
Towards AM excellence...
2006 -
Mentoring programme for water
operators
Completion of water services 78 process
Implementation of GIS
Assessment of electrical network
and development of IAR
Development of O&M plans for water &
sanitation
Implementation of electronic
maintenance management system
Multi-disciplinary management team
Secure political support
Establish management
framework
Embark on road to excellence
Phase roll-out to other infrastructure
services
Lephalale is a B3 local municipality situated in the Limpopo Province and has a population of 107,000 people.
Excluding farms, the municipality has 4,327 urban and 9,905 rural households. In 2004 the municipality
participated in a DPLG/EU funded initiative to establish sound asset management practices in South Africa . The
value of asset management was immediately recognized, particularly in light of massive urban expansion
required to accommodate of the upgrading of the Matimaba Power Station in 2010 – 2011. The senior
management team took joint responsibility for asset management and secured Council support for the
establishment of a multidisciplinary asset management team.
The team decided to pilot asset management through water services , but to develop policies, management
frameworks and asset registers in such a manner that it could apply to other infrastructure services . The
municipality appointed a professional services provider in 2005 to update the water asset management plan
and to identify improvements in business practices . In writing the plan , the team recognized the need for a
management framework and developed an infrastructure management policy that was approved by Council,
and risk and performance frameworks.
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3.3 Critical Success Factors
National and overseas experience has shown there are a number of factors that are critical to becoming an effective
asset management organisation:
“Critical to success” factors
1. An organisational champion at the highest level (the mayor, municipal manager)
2. A formally adopted IAMP which provides the basis for annual budget revisions
3. Dedicated people managing the AM planning process that do not have a role in day-to-day infrastructure
operations. In a very small municipality this may be one person for the entire organisation. In a large
municipality each sector may have a dedicated AM planning team next to the operations team.
4. A continuous improvement process which includes a specific improvement programme with allocated
resources and timeframes, actively monitored by senior management.
5. A strong change management culture that ensures that processes and data, once developed, become
embedded as ‘business-as-usual’ rather than a one-off compliance exercise to produce an IAMP.
But just as importantly there are some common areas that are known to hinder progress.
“Doomed-to-failure” factors
1. Setting unrealistic goals in the improvement strategy. Experience suggests that municipality need to allocate
about 2 to 3 times as much resource (staff time and / or Rand) as their initial estimate of what is required to
complete the task.
2. People undertaking the AM planning who do not have the right skills, have other ‘jobs’ to do, or do not have a
strong belief in the value of the work.
3. Collecting too much data early on in the process. Until an organizations has a clear understanding of what it
needs there is a risk that significant time and money is wasted capturing data that is not essential to the asset
management plann9ing process (further guidance on this is provided in section 6.1).
3.4 Summary
To improve, something has to change. Ultimately, there has to be widespread buy-in and entrenchment of new
management processes, some municipalities may elect to achieve this through organisation-wide adjustment of their
business processes. In others it may be necessary to pursue a somewhat more organic approach, the essential
ingredient being the energy of one or two champions convinced of the merits of the improvements and driving the
change from within.
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4. INFRASTRUCTURE ASSET MANAGEMENT PLAN
This section of the guideline focuses on the Infrastructure Asset Management Plan (IAMP). It provides a layout of the
plan, discusses the level of detail, and sketches an approach to the preparation of the document.
4.1 Approach
Figure 4-1 provides an overview of the process of preparing an IAMP – commencing with initial data collection and
using this to establish a picture of the status of the existing infrastructure (such as condition, criticality, value, extent
etc), and existing levels of service. Unless the municipality has an IAM Strategy in place, it is likely that target levels
of service are not well defined, and the first challenge is often to cement and document this vision (detailed
performance criteria and measures can be developed in a subsequent iteration). An analysis of the gap between
current and target levels of service identifies the development needs as they stand at the moment.
Figure 4-1: Process for Preparing an Asset Management Plan
Asset Knowledge
Level of Service(existing/desired)
Demand
Risk Management
Information and Data Collection
Affordability
Future Iterations
Life-Cycle Plan
AM Plan Adoption
AM Practice Improvement Plan
5
4
3
21
9
8
Financial Plan76
CMIP IDP Process
Implementation
ℵ Customer needsℵ Legal requirementsℵ Political
requirements
The next step is to identify changes in demand for the service over the planning period (which should be a minimum
of 10 years) and the impact this has on infrastructure needs - this will be influenced by the outlook of growth, and
measures taken to reduce losses and control demand (if any). This followed by contemplating, in a structured way,
the things that can go wrong and what can be done to avoid or reduce the risk of such events taking place.
All the preceding steps are then used to identify the gaps and issues that need to be addressed in the IAMP. This will
be done through a combination of asset management strategies (new construction, upgrading, renewal, operations
and maintenance, and disposal needs) and demand management over the planning period. The MTEF will provide a
3 year forecast of commitments as a starting point which can be reviewed and extended. This will need to be
reviewed considering the ability of the municipality to fund the budget needs in a sustainable way and identify the
tariff (or other revenue) implications.
Finally the process is wrapped up by assessing the way that infrastructure is managed at present, and determining
what are the most appropriate steps to take next in improving asset management practice. Once the plan has been
written, it is essential that it is submitted and approved by Council.
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4.2 Minimum Requirements
The minimum requirements for IAM Plans are indicated in Table 4-1.
Table 4-1: Minimum Requirements for IAM Plans
Element Requirement Tips
Info and Data
Collection
Within 2 years - the Asset Register must
cover all infrastructure assets and provide
data to support effective IAM, financial asset
classes must be aligned with an asset
hierarchy that is appropriate to local
circumstances, and realistic Expected Useful
Lives. Revaluation of all infrastructure assets
within 3 years, and updated every 3 years
thereafter.
• Technical and Financial management staff
need to work together to adopt a simple,
robust structure
• Adopt processes to keep information up-to-
date (e.g. add new assets, renew others)
• Review systems needs across all sectors
• Be sure to check that the input data is in fact
reliable
• Focus the detail on the more critical
infrastructure
Asset
Knowledge
Arrangements in place to provide IAM
reporting capability within 2 years.
• Can use a simple system linked to the AR
Level of
Service
Criteria and measures of levels of service
(availability and performance) to be adopted
by Council within 2 years, and included in
SDBIP. Actual performance to be established
within 3 years, and 5 and 10 year targets
determined. Include this information in the
IDP process.
• Explore possible measures in the first IAMP
and refine/confirm in the second
• Link Levels of Service to Customer Areas as
appropriate
• Keep the number of measures manageable
• Measures must be easy to implement
Demand In each IAMP, key drivers of demand are
identified and quantified (over 10 years),
noting the degree of certainty. Demand
management interventions are assessed.
• Input information should be available from
other sector reports (not intended to do full
technical modeling)
• Check the housing plans
• Where input data is in conflict or missing,
state the assumptions made
Risk
Management
IAMPs identify critical and important assets;
state the risk management process adopted,
and identifies risk responses.
• If there is no corporate framework, use a
rudimentary process in first IAMP, and refine.
• Use a consistent process across all sectors.
Life-Cycle
Plan
IAMPs identify a forecast of budget needs
over 10 years of the infrastructure required to
support the target Levels of Service (planning,
new construction, extensions, upgrading,
renewals, O&M, and disposals).
• Can use simple cost modeling
• Program renewals with a smooth cash flow
requirement
• Determine O&M budget needs on the basis of
a structured O&M Plan
Financial
Plan
IAMPs document the financial status of the
municipality, and determine a plan to fund
sector infrastructure needs over the 10 year
forecast period. State degree of confidence in
the budget forecasts.
• Consider funding scenarios based on previous
years’ budgets, demonstrate implications
Practice
Improvement
Plan
Structured process adopted for the
assessment of current practice and an
Improvement Plan adopted in each IAMP.
• Use a process that can be repeated each year
to monitor trends
• Can use the World Bank hierarchy as a
guideline on what to tackle first.
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4.3 Document Format
A suggested format for an IAMP is shown in Figure 4-2 below, and is similar to the model proposed in the IIMM.
Many variations on the format are possible, however this structure has a good flow from establishing future needs
(levels of service and future demand) through to defining the strategies to meet these needs, how much this will cost
and how it will be funded. Possible variations on the format could include:
• a separate asset knowledge section after the introduction (instead of being built into the lifecycle section) to help
to set the scene at the beginning of the document, and better follow the process flow;
• a separate section on ‘environmental management’ (particularly relevant for wastewater and stormwater sectors)
focusing on strategies for reducing environmental impacts of the activity; and
• building risk management strategies into each section (for example, O&M strategies focused on critical assets,
capital works programme derived from the risk register) rather than as a stand-alone section.
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Figure 4-2: Format of an IAM Plan
EXECUTIVE SUMMARY
• Summarises the key issues in the plan:
∼ Purpose
∼ Municipal context
∼ Asset description
∼ Levels of service
∼ Growth
∼ Lifecycle Management Plan
∼ Financial summary
∼ IAM practice
SECTION 1: INTRODUCTION
• Outlines the purpose and scope of plan, socio-economic context, legal framework and the approach adopted in
preparing the plan
∼ Background
∼ Approach
∼ Description of the network
∼ Statutory framework
∼ Relationship with other documents
∼ Document format
SECTION 2: LEVELS OF SERVICE
• Identifies current and target level of service and performance measures
∼ Targets for provision of basic services
∼ Customer expectations
∼ Municipality’s IAM strategy
∼ Current levels and standards of service
∼ Gap analysis
SECTION 3: FUTURE DEMAND
• Identifies key factors influencing future demand
• Predicts future changes in demand and degree of certainty
• Considers demand management initiatives
∼ Current supply and demand
∼ Assessment of future demand
∼ Demand management
∼ Projected demand
∼ Supply ceiling
SECTION 4: RISK MANAGEMENT
• Outlines risk management approach, identifies critical assets, assesses risks and identifies appropriate
responses.
∼ Risk Management Framework
∼ Asset Criticality
∼ Network risk exposure
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∼ Asset and network level risks
∼ Risk register
∼ Insurance
∼ Monitoring and review
SECTION 5: LIFE-CYCLE MANAGEMENT PLAN
• Assesses long-term development, renewal and routine operations and maintenance needs
∼ Replacement cost
∼ Asset age and condition
∼ Asset utilisation
∼ Asset criticality
∼ Development Plan
∼ Renewal [Rehabilitation/Replacement] Plan
∼ Operations and Maintenance Plan
∼ Disposal plan
SECTION 6: FINANCIAL PLAN
• Identifies long-term financial forecasts and budget/funding issues and assesses risk
∼ Financial performance of Municipality
∼ Operating activity
∼ Projected capital and operational funding requirements
∼ Analysis of funding requirements
∼ Funding Plan
∼ Consequences of under-funding
SECTION 7: ASSET MANAGEMENT PRACTICE
• Describes current IAM practices
• Identifies proposed enhancements
∼ Description of current practice
∼ Gap analysis
∼ Improvement Program
∼ IAM Plan adoption, review and monitoring
ANNEXURES
• Maps
• Summary of data
• Practice assessment
• Etc.
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4.4 Methodology
The first plan prepared for a service will normally be based on existing available information (though it may logically
follow the data collection exercise associated with establishing the asset register). Whilst the level of detail may be
limited, the plan should cover all assets, and all the process steps (even if this is using basic techniques and the
outputs are qualified with stated assumptions). In writing the first plan, it will become evident which elements of the
plan need to be strengthened, and the ongoing iterative process of improvement will have commenced.
The methodology adopted will be largely dictated by the availability of reliable and complete data, information from
recent technical reports, and the maturity of the asset management practice. This will influence the duration of the
exercise, as will the skills and availability of the officials that undertake the exercise, but could be expected to take 4
to 6 months to complete on average.
Figure 4-3: Example Methodology for Preparation of an initial IAMP
♦ Municipal mission, vision and functions♦ GIS data, network plans, Spatial Development Plans , Housing etc♦ Previous IAMP, IDP, Sector Plan, Masterplans, Project Reports, DMP etc.♦ Municipal Budget, Financial Policy, Risk Policy, SDBIP♦ HR information♦ Existing performance♦ Socio-economic data
♦ Availability at present and target (including achieving minimum required standards)♦ Performance criteria, measures and targets, time frame♦ Municipality’s formal strategy (if any)
♦ Demand needs now and over planning period (e.g. town or village extensions, increased unit consumption)
♦ How to address the gap (capital works or demand management)
♦ Identify existing data♦ Establish geographic hierarchy♦ Desktop iteration of asset grouping♦ Determine asset “criticality” and data collection
approach♦ Collect data and capture into the asset register♦ Collate , validate and summarise
♦ Existing capital (new/upgrading) projects, and identification additional projects required over the planning period (nature, objective, estimated cost and program)
♦ Assessment of existing maintenance and operations practice and resources, benchmark to industry practice, assess future needs
♦ Assessment of periodic renewal needs, existing plans and flag other needs in the planning period, with budget estimates
♦ Assessment of any de-commissioning or disposal of infrastructure required ♦ EPWP initiatives
♦ Overall financial performance of municipality♦ Historic budget and expenditure relating to this service♦ Tariff structures and debt collection performance♦ Budget requirements over planning period♦ Funding plan and tariff implications♦ Risks associated with underfunding
♦ Assessment of existing practice (systems, processes, data, organisational arrangements)
♦ Compliance with legal requirements♦ Identify priority areas for improvement of management practice
Collect Background and Context Information
Assess Levels of Service
Assess Future Demand
Review Life Cycle Needs
Determine Financial Requirements
Assess Asset Management Practices
Review Risks♦ Identify corporate risk management framework♦ Establish service delivery risk assessment approach♦ Identify credible risks to service delivery♦ Identify risks to critical and important risks ♦ Identify appropriate responses♦ Monitoring arrangements♦ Collate and summarise
Compile Asset Register
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4.5 Selecting the Appropriate Level of Detail
A theme that emerges throughout these guidelines is that asset management planning processes and IAMPs are not
‘one-size-fits-all’. Some municipalities may wish to develop their IAMP to an extended level of detail, such that they
almost form a procedures document for how asset management planning is undertaken in the organization. Others
prefer to keep the document to a higher level and have the details in supporting documents. Either approach can
work well.
In overseas countries, the trend has been for the first plans to be very long and full of theory – for two reasons, one
is that there is a lack of good practice to write about so the plans talked about what should be done rather than what
was being done, the second reason being that the ‘audience’ was relatively uneducated in asset management
planning and needed to have the theoretical background. As time has gone on, IAMPs have tended to become
shorter and to the point rather than longer.
Small infrastructure organizations may find the completion of an IAMP to be overwhelming and may find it useful to
start with a brief document, perhaps 10 – 12 pages long, which they can then build on over time. Such a document
might look like this:
• 1 page: An introduction to the municipality, key issues, strategic objectives/vision.
• 1 page: Asset knowledge – a table showing key asset statistics (e.g.: total lengths, value of each asset type)
and a graph of overall network condition).
• 1 page: Levels of service – a summary of how these have been derived (customer feedback, legislative and
technical minimums, IDP targets) and a discussion of the key level of service ‘gaps’.
• 1 page: Tabulated levels of service – perhaps around 5 key ones showing current and future targets and, if data
is available, a graph of the most important one showing how performance has trended over the last few years.
• 1 page: Future demand projections –graph showing population forecasts and demand forecasts by area with a
brief overview of key demand influences (e.g.: areas of significant growth, water supply consumption changes
such as increasing use of appliances, changing recreational needs).
• 1 page: Demand management strategies (e.g.: using price steps as a demand management tool, promotion of
off-peak travel)
• 2 pages: Asset lifecycle strategies –
∼ O&M strategies at a high level, e.g.: just a bullet point list of key activities ‘we inspect our above ground
assets annually’, ‘we monitor water quality at 10 beaches’, ‘we update our disaster response plan every 2
years’.
∼ List of capital works over the next 10 years, linked to the level of service gaps identified, including new,
upgrading works and renewal works.
• 2 pages: Financial forecasts – first page summary of assumptions and second page present summary of
financial forecasts.
• 1 page: Asset Management Practice Improvement – broad priorities and programme for improvement.
4.6 Summary
Like the IDP, the preparation of the IAMP is as much about the process as it is the final product. It is important to
follow the thought process from start to finish. Even if this is initially in a situation where there is poor quality
information, the rigor of the process will point to the main issues and guide the main improvements required. The
trick is to be honest about the quality of the input information, and contemplate the impact of that uncertainty on the
outputs of the plan (which may be significant in some instances or immaterial in others). This will drive a prioritised
process of improvement year-on-year, seeking only the information that is important to good decision-making.
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5. COMPREHENSIVE MUNICIPAL INFRASTRUCTURE PLAN (CMIP)
This section of the guideline focuses on the Comprehensive Municipal Infrastructure Plan (CMIP). It indicates how it will
draw on information from the IAMPs and provide support to the IDP process. A format and process for the development
of a CMIP is described, including minimum requirements.
5.1 The Purpose of CMIP
In these guidelines it is proposed that municipalities draw their IAMP’s together into one consolidated plan, called the
Comprehensive Municipal Infrastructure Plan (CMIP). Figure 5-1 illustrates the typical number of IAMPs that will feed
into the CMIP.
Figure 5-1: Integration of Infrastructure Asset Management Plans
The CMIP will contribute to the municipality’s infrastructure management effectiveness in a number of ways:
a. Providing robust infrastructure inputs to the IDP
Legislation has entrenched the Integrated Development Plan (IDP) as the principal strategic planning mechanism for
municipalities. However the IDP needs to be informed by robust information relating to the long-term management of
the municipality’s infrastructure. The CMIP is the document which will provide regulators and other stakeholders
with confidence in the infrastructure inputs to the IDP as illustrated in figure 5-2
Comprehensive Municipal
Infrastructure Plan
Co-ordination & integration of: - Spatial issues - Programs - Technical issues - Practices improvement - Prioritisation - Affordability
Solid Waste Disposal
Community Facilities
Roads and Storm Water
Sanitation
Electricity Supply
Water Supply
IAMP
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Figure 5-2: Infrastructure inputs to the IDP
Provides information on infrastructure service
level gaps in each area, risks and future demand
Analysislevel of development, access
to services, demographic information
IAMP/CMIP Process
Costed infrastructure options (lifecycle/tariffs
implications) to meet future strategic/level of
service scenarios
Appropriate timing and costing of projects
CMIP level of service and funding plan forecasts
IDP PROCESS
Development strategies and projects
Development objectives, strategies and options
Project Formulation
Integration of Programmes to IDP
Approval of IDP
b. Supporting more Informed Decision Making
The CMIP is not intended to be simply a collation of the individual IAMPs into one document. The CMIP should draw
out key information and strategic issues from each of the plans and present them in a way that enables decision-
makers (including elected representatives and external funding organisations) to make informed decisions. The CMIP
will enable these decisions to be made:
• with a clear understanding of the areas of needs and the community wants;
• with consideration of the long term view and understanding of the lifecycle cost implications of investment
decisions;
• with an understanding of the level of service implications of budget cuts;
• in a holistic way across sectors, so that trade-offs can be made both within sectors and between sectors;
• transparently, so that the rationale behind decisions is understood; and
• with confidence that proposed investments are sustainable and will achieve the benefits expected.
c. Engaging the Community in Deciding Priorities
While the CMIP itself might not be a suitable document for consultation with the wider community (i.e. beyond the
municipal structures such as ward committees) it should contain the information to facilitate that consultation. For
example, information relating to the impact of budget cuts on strategic objectives and levels of service. The way in
which the CMIP informs the municipality’s consultation processes is discussed further in section 6.
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d. Communication
The CMIP will have other secondary objectives beyond those described above, for example, fostering communication
and understanding of other sector needs within and outside the municipality.
5.2 Process for developing the CMIP
A recommended process for developing the CMIP is shown in table 5-1. The indicative timeframe shown to the left of
the table represents a municipality starting from scratch, with no existing mechanisms or structures to develop an AM
plan and very little base asset data. The key timelines are described below:
• By the end of year 1, management commitment and resources will be confirmed, an AM policy (and possibly
strategy as discussed in section 2) will be developed and a clear project plan for closing the necessary gaps in
information and processes will have been derived. A consistent structure and approach for IAMPs across the
sectors will facilitate the compilation of the CMIP, and this can be done through the development of a pilot IAMP
in the first year.
• By the end of year 2, asset registers will be compiled and the 6 IAMPs completed (as discussed in section 4, it
may be useful to develop one first as a pilot and model for the ensuing 5 IAMPs. If so, this should be done
during the first year).
• After 2 ½ years the CMIP is in draft form and ready for consultation over options and finalisation. In fact, it is
likely that at this stage that the CMIP will feed into the draft IDP process for consultation. Figure 5-3 below
illustrates how the CMIP might feed into the draft IDP.
Figure 5-3: CMIP feeding into draft IDP
Variation on approaches
The approach and timeframe suggested above is for municipalities that want to develop comprehensive IAMPs.
However rather than waiting for information to be collected and analysed, municipalities may wish to ‘jump in at the
deep end’ and write a first cut, simple, IAMP based on existing information, knowledge and processes, with a focus on
producing lifecycle AMP forecasts and compiling an interim CMIP within 1 year.
Sector IAMP
Draft CMIP Draft IDP Final CMIPSector IAMP
Sector IAMP
Sector IAMP
Sector IAMP
Final IDP
Oth
er
sect
or
pla
ns
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Table 5-1: A 3-year process for developing a CMIP Activity Discussion
Start 1. Management commitment
to proceed
The timeline indicated here starts after management are committed and resources are
assigned to the process (budgets and staff).
6 m
onth
s
2. Awareness
raising/training, AM policy
developed and IAM Team
convened
The ‘Getting started’ process is discussed in more detail in section 3.
3. CMIP structure and
process agreed.
The CMIP team should agree a common template for the IAMP and the CMIP which
has enough detail to show what information should be included and how it should be
presented. For example, what prioritisation frameworks should be applied and the
financial forecast templates to be used. An overall CMIP structure is suggested in
section 5.3; toolkits for financial forecasts are included in section 6.7.
4. Information and process
gaps identified
As discussed in section 3, this needs to be done early in the process to ensure that
budget and time is allocated for information capture and analysis. A detailed ‘AM gap
analysis’ is sometimes used. Another approach is to have a first stab at preparing an
AM Plan and identify process and data shortcomings in going through that process.
5. Project Plan developed The CMIP needs to be managed as a formal project with budgets, timelines and
responsibilities clearly allocated. The IAM Team should get this developed and signed
off by senior management.
12 m
onth
s
6. Resources confirmed Staff time dedicated to project as outlined in project plan, service providers engaged
(if required).
7. Development of ‘front-
end’ information for CMIP.
Some information in the CMIP will be common to all sectors and is needed for the
asset managers to compile IAMPs. Specifically, strategic objectives/vision, spatial
development plans, population forecasts, demographic information and any other
information relevant to all sectors should be developed and provided to asset
managers (the IDP should provide most of this information). 18 m
onth
s
Collation of asset registers. This process is discussed in detail in section 6.1.
2 y
rs Development of the IAMPs This process is described in detail in section 4.
IAM Team reviews all the
IAMPs
A detailed review is carried out to ensure that the IAMPs contain all the information
required for the CMIP development.
IAMPs updated and finalised To incorporate the gaps in information identified above.
First cut CMIP collated and
reviewed by IAM team.
CMIP team to review the collated results and see if the projected forecasts and
strategic scenarios are plausible and fit for submission to elected representatives and
the community as a draft proposal. 2 ½
yea
rs
Reviews and finalisation of
draft CMIP.
There will be a process of grouping each sector’s strategic scenario into one (e.g.:
‘high development’, ‘medium’ and ‘status quo’ investment levels. Projects will be
ranked according to the optimized decision making approach adopted.
Community consultation Consultation over strategic scenarios with councilors, ward committees and the
broader community (described in section 6.4).
Agree outcomes
3 y
ears
Finalise CMIP For adoption by the municipality and submission into the IDP process.
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5.3 CMIP Format
A suggested format is illustrated in Figure 5-4. Note that the format proposed is for submission as a draft document
for debate with councilors and the community. The format will be modified in its final form to present the adopted
solutions. The debate over the level of service and budget forecasts presented in the draft CMIP may well occur
simply as part of the IDP process, however there is some value in getting councilors to sign off on the CMIP (as a
draft) before submitting into the IDP process.
Figure 5-4: Typical Format of CMIP
SUMMARY
• Easy to read summary of strategic issues and options and financial forecasts that can be read as a stand-alone
document by a layperson.
ABOUT THE PLAN
• what it contains, how it was developed, fit with other planning documents, how you can be involved in
decisions.
SECTION 1: OVERVIEW OF THE MUNICIPALITY
• Strategic vision
• AM policy
• Key statistics – to give a big picture view of the scope and type of community and infrastructure involved (e.g.:
population, demographics, infrastructure value and quantity, past expenditure)
SECTION 2: STRATEGIC ISSUES, OPTIONS and PRIORITIES
• national targets for infrastructure development
• strategic issues – gap between current infrastructure development and national targets.
• strategic level of service and budget scenarios
• major proposed projects in order of priority
• (for final plan, should also include a discussion of community feedback on the options and the rationale for the
adopted scenario).
SECTION 3: SECTOR SUMMARIES
• For each sector area, provide an infrastructure overview, important sector issues, level of service targets for
the preferred option with 2 alternatives proposed, key risk areas and financial forecasts.
• water supply, sanitation, community facilities, solid waste, roads and stormwater, electricity
SECTION 4: CONSOLIDATED FINANCIAL FORECASTS
• cash flow projections
• tariff implications, including cross-subsidisation required
• consolidated loan schedule
• impact on debt-equity ratio
SECTION 5: CONSOLIDATED IMPROVEMENT PLAN
• improvement projects, priorities, timeframes and costs
Further guidance on developing specific sections of the plan is included in section 6.
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5.4 Minimum requirements for a CMIP
The following 10 criteria are the minimum requirements for a CMIP:
Table 5-2: Criteria for minimum requirements for a CMIP
Criteria Minimum Requirements
1. Municipality context Information on current land use, customer types, population forecasts, spatial forecasts (at
least for the first 5 years of the plan).
2. Strategic objectives Relevant strategic level of service targets set through national or provincial standards or the
municipality’s strategic vision / mission statement (if the latter exists).
3. Asset Knowledge
Summarised information based on reasonable complete records on:
- asset quantities
- asset value (to financial standards, GAMAP)
- asset age, condition and expected lives (top down assessments)
The information should be able to demonstrably link to more detailed information available in
IAMPs and supporting asset databases.
4. Levels of Service Targets For each sector, one level of service supporting each core service criteria, as a minimum, for
availability, quality, reliability and responsiveness. Target levels of service for years 1, 5 and
10 (option to include a 20-year target). The rationale behind the adoption of the target levels
of service, including how customer input has been considered.
5. Future Demand Needs Population and demographic forecasts for a 10 year period. Spatial development proposals for
a 5 year period.
6. Risk Management The highest criticality assets and risks and a clear action to address these.
7. Project Decision Making The approach for prioritisation of projects within sectors and between sectors. A list of major
projects for the municipality in priority order.
8. Financial Forecasts For a minimum of 10 years, summarised for each sector but with a demonstrable link to
detailed budgeting carried out for the IAMP. The financial forecasts must include funding for all
works and strategies proposed in the IAMP. The underlying assumptions and the confidence in
the accuracy of each key area of expenditure should be stated. Cash flow projections, tariff
implications (including cross-subsidisation required) and a consolidated loan schedule must be
provided, as well as an indication of the impact on debt-equity ratio.
9. AM Policies Policy statements for each AM activity area (valuations, consultation, decision making,
growth/demand management)
10.Improvement Programme A consolidated 5-year programme of management improvement projects for all sectors with
resources, timeframes and expected benefits described for each project. The financial forecasts
should show where funding has been allocated for these projects.
5.5 Summary
The municipality has one budget that needs to address a wide range of competing needs. The objective of the CMIP
is to communicate to decision-makers all relevant information relating to infrastructure in one brief document. It is
based on an aggregation of the holistic and long-term needs of each sector, as identified in the IAMPs, as well as an
analysis of common themes, issues of alignment and priority.
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Asset Knowledge
Level of Service(existing/desired)
Demand
Risk Management
Information and Data Collection
Affordability
Life-Cycle Plan
AM Plan Adoption
AM Practice Improvement Plan
5
4
3
21
9
8
Financial Plan76
6. BASIC ASSET MANAGEMENT TOOLKIT
This section of the guideline provides guidance on how to tackle each step in assembling an IAMP. As noted previously,
the guideline is substantially focussed on guiding small municipalities to achieve a foundation of appropriate practice.
Such municipalities may not initially implement all the techniques indicated in this section, but they should strive to do
so within their capacity constraints, and pursue this goal in the practices improvement plan. Some municipalities may
elect to pursue more advanced techniques according to their needs, and perhaps in very specific areas (such as
optimised treatment of road maintenance and renewals through the use of a PMMS).
6.1 Information and Data Collection
An essential starting point for the preparation of an IAM
Plan is to identify existing available information and
assess its relevance, accuracy and “fit” with other
information. Naturally, maximum use should be made of
existing information, but there also needs to be a reality
check on its validity. Any shortfall in information needs
to be noted, and where necessary, reasonable
assumptions made (and qualified in the IAM Plan) – it is
not the intention to replicate or prepare technical reports
as part of the IAM Plan preparation. Table 6-1 indicates
potential sources of relevant information to contribute to
the preparation of an IAM Plan.
Table 6-1: Potential source documents used in for preparing an IAM Plan
Municipality’s Vision statement/ Long Term Growth and Development Strategy
Latest Integrated Development Plan (IDP)
Latest Asset Management Plan
Sector Business/Strategic Plans
Service Delivery and Budget Implementation Plan (SDBIP)
Immovable Asset Financial Policy
Maintenance Strategy
Customer Charter
Planning norms, and design and construction standards
Latest Financial Statements
Organisation Chart
Corporate Risk Policy and register
Information Management Strategy
Sector Development Plans, Masterplans, network layouts
Spatial Development Plan
Housing Plan
Demarcation Board data
Provincial Growth and Development Strategy
Contracts with bulk suppliers
Disaster Management Plan
Asset schedules or registers
An absolutely essential input is information on the nature, extent, and condition of the infrastructure, which should
reside in an Asset Register.
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6.1.1 Asset Register
Figure 6.1 indicates the process for establishing an asset register. As indicated earlier in this guide, municipalities
are required (in terms of the MFMA) to establish an Asset Register that will enable depreciation of individual assets.
Figure 6-1: Process for Establishing an Infrastructure Asset Register
⎯ Municipal functions⎯ Legal requirements⎯ Technical process
requirements⎯ Systems capability⎯ Infrastructure network
and extent
Design asset hierarchy and define customer areas
Design asset register format
Establish EULs and unit rates
⎯ Determine existing data sources
⎯ Develop asset assessment field guides
⎯ Develop data management plan
Develop Immovable AM procedures manual
Plan data collection
Collect and capture data Validate data
Establish asset register
Continuousupdating
PeriodicUpdating/re-valuation
To achieve this, municipalities will need the following:
• An asset hierarchy (or “tree”) that will enable information on all the municipality’s infrastructure assets to be
aggregated in an useful way for asset management;
• A consistent asset identification system (which enables specific assets to be readily identified); and
• Processes for the ongoing updating of information (after capturing baseline data).
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When compiling an asset register for the first time, consideration needs to be given to the “design” of the asset
hierarchy. It must take into account all the asset types that will be encountered in that specific municipality, and
consider the most appropriate way for information to be aggregated for reporting purposes. Furthermore, the level of
detail of data (e.g. at facility, asset, component, or sub-component level, and the extent of information on each
element) needs to be carefully considered – data collection is expensive and time consuming. This decision should
be guided by the intended use of the information.
The approach needs to accommodate the following needs:
• simple life-cycle cost modelling;
• recognition of the different risk profile of elements of the infrastructure;
• sufficient detail for the municipality to make informed strategic and tactical decisions;
• consistency with the approach used in any existing systems (such as maintenance management or GIS); and
• to cater for GAMAP requirements (i.e. the need to isolate material elements of infrastructure that have different
expected useful lives – see figure 6-1):
Figure 6-2: Infrastructure Asset Lifecycle Cost Models
O&M
Renewal
Ass
et
Perf
orm
ance
Minimum performance
Expected Useful Life
Creation
O&M
Rehabilitation
Expected Useful Life Extended Life
Ass
et
Perf
orm
ance
Renewal
Creation
* Note: If a part of an asset needs to be regularly replaced as part of an
ongoing lifecycle plan, it should rather be defined as a separate “asset”.
The level of detail should generally guided by defining assets at a level that would typically be considered practical
for purposes of renewal. Some municipalities may consider it appropriate to define the hierarchy to a finer level of
detail, for example to facilitate more advanced maintenance management techniques.
Apart from a hierarchy of asset types, there will be a need to define areas (e.g. wards, suburbs, villages, and
catchment/depot areas), so that information can be grouped on in a consistent way and without duplication or gaps.
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Ideally, the area definitions should be applied consistently across all sectors, as this will facilitate effective
coordination and consolidation of needs.
In line with the recommendations included in the IIMM, data in the following categories should be captured for each
asset as an initial priority:
• asset identification;
• location (this will be in a descriptive style, such as a street address, or other landmark reference, and GPS co-
ordinates if available or required by the municipality);
• materials/type;
• size;
• quantity;
• year constructed;
• year last renewed;
• expected useful life
The following may initially be known only at network or asset-group level (capturing more detailed and accurate data
at individual asset level may be carried out on a prioritised basis according to a structured improvement
programme):
• condition grade;
• capacity;
• utilisation;
• remaining useful life;
• asset performance (measures to be in line with the network level performance measures);
• criticality grade; and
• data accuracy.
Each data category needs to be interpreted for each asset type, and applied consistently not only in the initial data
collection, but also in subsequent years. Even for small asset portfolios, the preparation and documentation of a
simple Data Management Plan will help in ensuring initial and continued data quality. The approach will be influenced
by the method of accessing data (e.g. in the field, from GIS, from existing registers, or a combination), and the
system used for capturing and reporting. An example of the content of an immovable asset register is provided in
Annexure A, as well as an example of valuation data.
6.1.2 Asset Management Information System (AMIS)
An AMIS will support a municipality in managing its infrastructure assets. The functionality and degree of
sophistication of the system needs to be appropriate to the nature, size, and complexity of assets, and the capacity
of the municipality. For small portfolios, a simple spreadsheet could be adequate, whereas sophisticated (and
relatively expensive) systems are adopted by cities with extensive portfolios and the resources to manage the
system.
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Figure 6-3: Possible systems linkages to the Asset Register
Selective linkages may be considered appropriate, depending on the required functionality, for example:
• linking (GIS) mapping images to the physical asset register;
• down loading infrastructure data into design programs for network expansions;
• linking the asset register to a capital works system (new projects and renewals);
• a maintenance management function providing maintenance budgets and a resource planning facility, and
generating work schedules based on condition data;
• a maintenance history function;
• a helpdesk facility to manage, track and record reactive maintenance;
• recording and reporting on environmental incidents;
• materials, spares and tools inventories and stocktaking functions;
• heritage asset listing;
• land register;
• energy usage;
• linking the asset register to the accounting system to update valuations, written down value and depreciation;
• linking property and water meter registers to the asset register and accounting systems; and
• linking to insurance schedules.
It is the prerogative of each municipality to consider the merits and affordability of pursuing any or all of the above
linkages to support its business processes.
The following are typical modules that could be included in a basic system:
• asset register;
• maintenance management;
• contract management;
• work package management;
• stock control; and
• condition monitoring.
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Advanced functions can be added to enhance long term planning and improve efficiency, such as the following:
• predictive modeling;
• detailed risk assessment;
• evaluations of asset solution options;
• optimised decision making; and
• data management.
6.1.3 Asset Identification
All infrastructure assets must have a unique identification reference number. A common approach must be used
across all departments in the municipality, such as the following:
Category - Sub-category / Asset Class / Asset Descriptor - Sequential Number for the asset type.
The following are definitions of the asset categories (in accordance with GAMAP):
Property, Plant and Equipment:
• Land (not held as investment assets);
• Infrastructure Assets are ones that form part of a network of similar assets (immovable assets such as roads,
water systems etc);
• Community Assets are resources that contribute to the general well-being of the community (immovable assets
such as community halls, clinics, parks and outdoor sport and recreation facilities);
• Heritage Assets are culturally, environmentally, or historic significant resources (such as war memorials, historic
buildings, conservation areas, archaeological sites, statues etc); and
• Other Assets are ordinary operational resources (such as the office building and stores, and movable assets such
as vehicles and equipment).
Table 6-2 is an example of how the categories can be broken down into sub-categories for ease of reference and
reporting:
Table 6-2: Example of PPE sub-categories
Category ID Sub-Category ID
Land LA Sub-categories based on zoning
Roads Network RDS
Storm-water Network STW
Water Network WAT
Sanitation Network SAN
Solid waste disposal SOW
Infrastructure Assets IA
Electricity Network ELE
Sport & Recreation Facilities SPR Community Assets CA
Community Facilities COF
Heritage Assets HA Sub-categories as necessary – e.g. nature
reserves, memorials, historic sites etc
Buildings BUI
Vehicles VEH
Operational Plant and Equipment OPE
Other Assets OA
Office Furniture and Equipment OFE
Assets (both movable and immovable) are further classified according to asset class. The classifications need to be
reviewed to ensure they cover all the types of assets in the municipality, and are defined in such a way that will
enable effective management reporting. An asset class will often comprise a number of similar assets that can be
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grouped together for ready identification using an asset descriptor. In the case of movable assets, this can be on the
basis of asset type (e.g. vehicle types), and, for immovable assets, location (e.g. reticulation in Aganang, boreholes
in village 6, mechanical plant at Pump Station 3).
Examples:
• IA-WAT/MEC/PS6 - 9 is the identification for: Infrastructure Assets - Water Network / Mechanical Plant / at Pump
Station No6 – Asset number nine;
• CA-SPR/BG/SEL - 2 is the identification for: Community Assets – Sport & Recreation / Bowling Green / Seleka –
Asset number two; and
• IA-SAN/RET/MA2 - 3 is the identification for: Infrastructure Asset – Sanitation Network / Reticulation / Marapong
Extension 2 – Asset number 3.
Maintenance-significant components of the infrastructure assets (e.g. the hydrants, manholes, valves, and house
connections associated with water reticulation) can be identified in a maintenance management system using an
extension of the asset identification referencing system stated above.
6.1.4 Asset Hierarchy
The objective of an asset hierarchy (examples of which are provided in Table 6-3) is to portray a clear, holistic and
logical breakdown of infrastructure in each of the services, using a structure that is consistent with the asset
categories (discussed above) and classes (see 6.1.5) used in financial management (discussed above). Financial
reporting will typically be required at the Facility/Asset Group level.
Table 6-3: Example Infrastructure Asset Hierarchy
Network Facility or Asset Group Asset
Formation
Pavement structure
Pavement surface
Paved Arterial and Distributor Roads
Kerbs and channels
Formation
Pavement structure
Pavement surface
Paved Collector and Residential Roads
Kerbs and channels
Formation Gravel Roads
Gravel surface
Bridges
Retaining walls
Major culverts and subways
Structures
Overhead gantries
Footpaths Hardened footpath surface
Street signs Traffic Management
Traffic lights
Street Lights Street lights
Commuter shelters Street furniture
Guard rails
Buildings Buildings
Roads
Fences Fences
Pipelines
Culverts
Storm-water
drainage
Interception and conveyance
Open channels
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Network Facility or Asset Group Asset
Nodes, transitions
Earth wall
Site
Attenuation
Perimeter protection
Building Hydrological Monitoring Stations
Specialist Equipment
Civil works
Building
Electrical Plant
Mechanical Plant
Pump Stations
Perimeter Protection
Dam wall
Site
Dams
Perimeter Protection
Pipes
Dam wall
Tanks
Spring protection
Perimeter protection
Building
Casing
Perimeter Protection
Electrical plant
Mechanical plant
Boreholes
Meter
Civil Works
Mechanical plant
Electrical plant
Buildings
Pipes
Meters
Site
Water treatment works (may be broken down per process element)
Perimeter protection
Civil works
Building
Electrical Plant
Mechanical Plant
Telemetry
Meter
Site
Pump station
Perimeter Protection
Pipelines
Valves
Bulk water pipelines
Meters
Civil works - reservoirs,
towers
Tanks
Support structure for tanks
Mechanical plant
Chlorinator
Meters
Hydrants
Water supply
Storage
Telemetry
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Network Facility or Asset Group Asset
Perimeter protection
Site
Reticulation
Hydrants
Meters
Distribution
Communal standpipes
Sewerage reticulation Collection
Vehicles (e.g. Honey sucker,
tractor/trailor)
Rising mains Bulk pipelines (outfall sewer)
Gravity mains (outfall)
Civil works
Building
Electrical plant
Mechanical plant
Telemetry
Meter
Site
Pump station
Perimeter protection
Civil Works
Mechanical plant
Electrical plant
Buildings
Meters
Site
Sanitation
Wastewater Treatment Works (may be broken down per process
element)
Perimeter protection
Vehicles Collection
Containers/bins
Buildings
Electrical plant
Mechanical plant
Site
Transfer stations, and processing facilities
Perimeter protection
Earthmoving and compaction
equipment
Landfill preparation
Perimeter protection
Building
Mechanical - weighbridge
Solid waste
disposal
Landfill site
Electrical - weighbridge
Overhead lines
Underground lines
HV Transmission Network (>22kV)
Site
Site
Building
HV outdoor equipment
HV GIS equipment
HV transformers
HV Substations (>22kV)
MV indoor equipment
Site
MV overhead
Electricity
supply
MV Network (<22kV)
MV underground
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Network Facility or Asset Group Asset
Site
Building
MV outdoor equipment
MV indoor equipment
MV Substation (<22kV)
MV transformers
LV underground
LV overhead
LV Network
Consumer meters
Workstations
Software
Telemetry
Network Management
Load Control
Paved areas (vehicles) Roads
Gravel areas (vehicles)
Hardened footpath surface Hardened surface (pedestrian)
Tennis/basketball court
Buildings Buildings
Swimming Pool Swimming Pool
Pipes
Culverts
Open channels
Nodes, transitions
Earth retention wall
Storm-water
Storm-water nodes/
transitions
Grass, shrubs and trees
Park furniture
Spectator stands
Lighting
Sports-fields,
Parks and
Cemeteries
Open Space
Perimeter protection/fencing
Site
Structure and building fabric
Building finishes
Plumbing
Electrical
Air conditioning
Lifts
Fire prevention and protection
Equipment for theatres and
council chambers
Gas installations
Community
Buildings and
Administration
Offices
Each Community
Building Type
Perimeter protection
6.1.5 Expected Useful Lives of Assets
The classes of assets stated in the following tables have been determined bearing in mind the need to distinguish
assets that have significant financial value in relation to the sub-category, perform different functions, have different
potential risk profiles, and have different Expected Useful Lives (where this makes a significant financial impact on
depreciation). The tables need to be reviewed by each municipality – omitting assets not applicable and adding new
ones where necessary. The Expected Useful Lives must also be checked to ensure that they are realistic in view of
the standard of design and construction, the utilisation, the operating environment, the maintenance regime, legal
prescriptions, and potential obsolescence.
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Table 6-4: Example of Asset Classes and Expected Useful Life of Assets
Asset Class ID Expected Useful Life (years)
HV Transformers HVT 50
HV Lines HVL 50
HV Cables HVC 50
HV Substation Equipment HVS 50
MV Transformers (Transformers & Mini- Subs) MVT 45
MV Cables and Lines MVC 50
MV Substations Switch Gear MVS 45
LV Network (overhead) LVN 45 (see note 1)
Network Management NM 20
Consumer Electricity Meters (credit type) CEM 30 (see note 2)
Telemetry TEL 20
Buildings BUI 50
Site (access roads, parking, footpaths, lighting, landscaping, irrigation) EF 15
Perimeter protection (Fencing, walls, gates) PP 15
Paved arterial and distributor roads ADR 25 (see note 3)
Paved collector and residential roads, and parking areas CRR 50 (see note 3)
Gravel roads and parking areas GR 25 (see note 3)
Footpaths FP 50
Streetlights STL 25
Road signs RS 7
Traffic lights TL 7
Bridges, subways and culverts BSC 120
Guard rails and commuter shelters GBS 15
Dams (Civil) DAM 100
Boreholes (Civil) BH 30
Springs (Civil) SPR 30
Treatment Works (Civil) TW 50
Pump Stations (Civil) PS 50
Storage (Civil) STO 50
Bulk Water Pipelines BPI 120 (see note 4)
Water Reticulation RET 120 (see note 4)
Water Meters MET 15
Mechanical Plant MEC 15
Electrical Plant ELE 15
Outfall sewer OFS 60 (see note 4)
Sewer reticulation SEW 60 (see note 4)
Erosion protection structures EP 15
Storm-water pipelines and lined channels PLC 50
Unlined channels ULC 10
Attenuation ponds AP 25
Landfill site (civil) LS 20 (see note 5)
Community Buildings (Abattoirs, Care Centers, Clinics, Community
Centers, Disaster Management Centers etc)
CBU 50 (see note 6)
Cemeteries CEM 50
Parks PAR 50
Sportsfields SPF 50
Spectator stands STA 40
Flood lighting FL 30
Swimming pools SP 20
Bowling greens BG 20
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Tennis courts TC 20
Golf Course GC 30
Solid Waste Disposal Vehicles SWV 10
Sludge Disposal Vehicles SDV 15
Wheelie Bins WB 10
Skips and Community Bins CBI 20
Notes:
1. 60 years if underground cables.
2. 10 years if pre-paid meters.
3. Depending on the financial policy of the municipality, roads can be split into formation, pavement structure,
pavement surface, and kerbs and channels, thereby reflecting the different expected useful life of each.
4. The Expected Useful Life of pipes can vary substantially based on a number of parameters, e.g. if the material is
asbestos-cement, the figure could be as low as 35 years.
5. The Expected Useful Life of landfills needs to be determined on a case-to-case basis depending on available air
space and fill rate.
6. The expected useful life of cemeteries needs to be based on a case-to-case basis.
6.1.6 Condition Assessment
The approach adopted for determining condition needs to:
• be standardised so that it can be consistently applied across all municipalities to enable effective benchmarking,
trend monitoring, and data aggregation;
• be cost effective, repeatable and objective;
• be linked to the expected failure pattern of the specific assets (wherever practicable);
• be modeled on performance criteria rather than visual inspection of condition where such is not practicable or
inappropriate (e.g. pipelines, power cabling);
• align with existing industry norms in each sector;
• support robust valuation; and
• support the modeling of renewal budget needs.
A simple generic five-point grading can be adopted, as indicated in Table 6-5.
Table 6-5: Generic Condition Grading
Grade Description Detailed description Indicative RUL
1 Very good Sound structure, well maintained. Only normal maintenance required. 71-100% EUL
2 Good Serves needs but minor deterioration (< 5%). Minor maintenance
required. 46-70% EUL
3 Fair Marginal, clearly evident deterioration (10-20%). Significant
maintenance required. 26-45% EUL
4 Poor
Significant deterioration of structure and/or appearance. Significant
impairment of functionality (20-40%). Significant renewal/upgrade
required.
11-25% EUL
5 Very poor Unsound, failed needs reconstruction/ replacement (> 50% needs
replacement) 0-10% EUL
‘EUL’ is Expected Useful Life
‘RUL’ is Remaining Useful Life
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The column on “indicative” remaining useful life (RUL) is provided in Table 6-5 as a general guideline for field
inspections for above-ground (visible) assets, and reflects the typical parabolic deterioration curve shown in Figure 6-
4.
Figure 6-4: Typical deterioration curve
TIME
CONDITION
Very Poor
Assessed condition
Deterioration under routine maintenance
Poor
Fair
Good
Very good
Premature failure under poor cycle-management regimeExpected Useful Life
Remaining Useful Life
TIME
CONDITION
Very Poor
Assessed condition
Deterioration under routine maintenance
Poor
Fair
Good
Very good
Premature failure under poor cycle-management regimeExpected Useful Life
Remaining Useful Life
The generic condition grading should be interpreted for consistent application across each asset type. Field guides
can help in ensuring consistent interpretation, using photos and descriptions of specific distresses to be noted during
inspections. Table 6-6 is an example of a more specific condition grading for lined channels.
Table 6-6: Condition Grading – Lined Channels
Grade Condition Description
1 Very Good Joint and lining in excellent condition. Clear of impediment. Upstream structure excellent with no
unwanted vegetation.
2 Good Joint condition slightly peeling and lining slightly blemished. Minor obstruction occur, result in minor
capacity reduction. Some unwanted vegetation starts to appear. Upstream structure slightly blemished.
Hairline cracks, no spalling, honeycombing of fine aggregate only. No reinforcement visible and not
corrosion. No erosion or scour. No elements have collapsed.
3 Fair Joints are cracking and lining has obvious blemishes. Some blockage and moderate capacity reduction.
Less than 5% unwanted vegetation. Upstream vegetation obvious. Cracks more than 2 mm wide.
Visible spalling, honeycombing of coarse aggregate. No reinforcement visible, no corrosion. Erosion and
scour at edged. No collapsed elements.
4 Poor Joint are open, but not serious condition. Major blemishes appear on lining. Blockage causing significant
capacity reduction. Unwanted vegetation less than 30%. Major blemishes appear on upstream
vegetation. Large cracks with displacement, visible spalling, honeycombing of coarse aggregate.
Exposed reinforcement with corrosion. Significant erosion or scour. No collapsed elements, but
horizontal or vertical displacement is evident.
5 Very Poor Failed and in very poor condition.
6.1.7 Asset Valuation
It is essential that monetary value be ascribed to the infrastructure for a number of reasons. For asset managers,
one of the most important reasons is to understand the cost of asset depreciation and replacement and to make sure
there is sufficient funding to maintain the network in the long term.
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In the past, infrastructure asset values were captured, if at all, on an historic cost basis in the financial statements.
The MFMA now requires municipalities (in terms of GAMAP 17) to state the "fair value" of all infrastructure assets
under their control. Actual acquisition/construction costs are initially stated, then subjected to depreciation, but
there is also a requirement for periodic re-valuation.
The figures in the financial statements are more than book entries, but are a financial representation of the potential
service value of the assets to the community and their consumption over time. The approach recognises that a range
of factors (including the quality of maintenance) may affect the life expectancy of an asset. Consequently periodic
re-assessment of actual remaining useful life is essential, particularly as the lives of infrastructure assets may span
several decades. A Depreciated Replacement Cost approach to valuation of infrastructure assets is proposed (in line
with the Accounting Standards Board).
Depreciated Replacement Cost (DRC)
CRCxEULRULDRC =
Where RUL = Remaining Useful Life, established as follows:
a. Above ground assets – by visual assessment of condition and knowledge of the maintenance regime (condition
grading table gives guidelines);
b. Below ground assets – Expected Useful Life minus age (since construction or last renewal); and
EUL = Expected Useful Life, which is the anticipated life of an asset from acquisition or renewal until failure taking
cognisance of the operating environment and the maintenance regime.
CRC = Current Replacement Cost which is an estimate of the current cost of replacing the asset with a modern
equivalent of similar capacity, based on unit rates. The unit
rates should include provision for the cost of the plant,
materials and labour associated with construction, as well as
planning, design and supervision inputs where applicable, and
VAT. The unit rate items need to be aligned with the asset
hierarchy, and a unit rate is needed for each type of each
asset (e.g. different materials and diameter of pipe). Provision
should also be made in the rates for secondary assets (e.g.
manholes, valves and consumer connections for pipelines).
Note:
The residual value of infrastructure is often taken to be zero as this represents the service potential at the end of an
assets useful life, and it is simple to administer.
GAMAP presents minimum figures for Expected Useful Life for some asset types, and the National Treasury
Guidelines and IIMM also recommend ranges. Based on these, and more specifically, experience of actual life
achieved of such assets in South Africa, alternative figures are recommended in table 6-3. These may be adjusted
and refined based on experience of the particular assets in the locality (depending for instance on local design
practice, construction standards, corrosive environmental or soils conditions). Each municipality should strive to
align the Expected Useful Lives adopted in their Financial Policy with actual practice.
DRC
CRC
EUL
CRC Current Replacement Cost EUL Expected Useful Life RUL Remaining Useful Life
RUL
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6.1.8 Asset Criticality
Identifying critical assets is often the first step in managing asset risk. It is necessary to have some form of
measurement of the consequence of failure, and therefore an indicator of the “criticality” of the assets. This will
enable the following:
• focusing of the level of detail and accuracy of data collection exercise;
• crafting of focused maintenance responses;
• prioritisation of asset renewal;
• prioritisation of asset-level risk mitigation actions; and
• measurement of the overall risk exposure of each network.
A basic approach is presented in Table 6-6, where the impacts of asset failure are contemplated using a simple rating
approach. The potential impacts are aggregated, resulting in the allocation of a criticality grading on a simple 3 point
scale (Table 6-8). The criteria and rating attributed to each impact, and the criticality grading bands will need to be
tested and adjusted over time, based on application.
The approach should typically render a small proportion of the assets in the “critical” and “important” categories
(perhaps up to 5% and 15% respectively in a network with optimised risk exposure), so that they receive the special
attention required. The consequence of failure of each asset will need to be carefully considered – for example,
elements of a water reticulation system are likely to be non-critical (the service should be able to be restored in
reasonable time), whereas a water supply pump may be critical, or not, depending on whether a standby pump is
provided. Similarly an isolated reservoir could be considered important, but inter-connectivity with others could
render it non-critical. The assessment of criticality is therefore a site-specific task.
Table 6-7: Consequence of Failure - generic
Area of Impact Measure Rating
Loss of life or multiple illness/injury 15
Single illness/minor injury 5 Public and municipal employees’ health
and safety No effect 0
More than R100,000 6
Between R20,000 and 100,000 4 Financial losses (cost of repairs and/or loss
of revenue) Less than R20,000 2
Major impact 8
Minor impact 4 Service delivery performance
No effect 0
Major 10
Minor 5 Environment
No effect 0
Table 6-8: Criticality Grading
Consequence of
Failure Score (sum of ratings
from Table 6-7)
Description Criticality
Grading
≥15 Critical 1
11 – 14 Important 2
≤10 Non-critical 3
Municipalities may elect to conduct a more detailed risk assessment as part of their improvement in infrastructure
management practice.
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Asset Knowledge
Level of Service(existing/desired)
Demand
Risk Management
Information and Data Collection
Affordability
Life-Cycle Plan
AM Plan Adoption
AM Practice Improvement Plan
5
4
3
2 1
9
8
Financial Plan76
6.1.9 Data Accuracy
It is necessary to record and track the accuracy of the data collected on each asset as indicated in Table 6-9. The
most accurate information available to a municipality should be for the most critical assets, and this should be borne
in mind when planning a data collection exercise or improvement planning.
Table 6-9: Data Accuracy
Grade Description Accuracy
1 Accurate ± 1%
2 Minor inaccuracies ± 5%
3 50% estimated ± 20%
4 Significant data estimated ± 30%
5 All data estimated ± 40%
The use of experienced staff, a field guide and inspector training will help in obtaining consistent data. Availing the
results of the previous iteration of data collection may be appropriate in some cases to foster consistency of approach
(e.g. only noting changes to condition grading, utilisation etc).
Once the data has been collected and captured, it is essential that the aggregated data is reviewed by a person
familiar with the assets to ensure that it is representative and consistent. The IIMM recommends an independent
review of 5% of the data as a quality assurance measure.
6.2 Asset Knowledge
The information and data collected in the previous sub-section needs to be summarised in a way that will inform
asset management decision making. Data will need to be reported in a way that is easily understood, with
summaries for asset types, and an area basis, as well as the ability to drill down to specific assets. Figures 6-5 to 6-
10 are examples of aggregated report outputs derived from the data in an Asset Register that can be used to guide
and inform tactics used in the IAM Plan.
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Figure 6-5: Example - Nature and Extent of Assets
77 No. Boreholes
35 km Bulk Water Pipelines
425 km Reticulation
6 No. Pump Stations
312 No. Storage Facilities
R172 million Replacement Value
R116 million Current Value
Reticulation65%
Storage21%
Pump Stations
6%
Boreholes1%Bulk
Pipelines7%
Figure 6-6: Example - Length, Age and Material – Water Reticulation
0
50,000
100,000
150,000
200,000
250,000
1960's 1970's 1980's 1990's 2000's
Pip
e Le
ngth
Inst
alle
d (m
)
HDPEuPVCAC
Figure 6-7: Example - Asset Age Summary
R 0
R 5,000,000
R 10,000,000
R 15,000,000
R 20,000,000
R 25,000,000
R 30,000,000
R 35,000,000
R 40,000,000
R 45,000,000
Rep
lacem
en
t V
alu
e (
CR
C)
0-5 yrs 6-10 yrs 11-15 yrs 16-20 yrs > 21 yrs
Asset Age
Storage
Pump station
Reticulation
Bulk waterpipelines
Bulk supply
Figure 6-8: Example - Asset Condition Summary
R 0
R 10,000,000
R 20,000,000
R 30,000,000
R 40,000,000
R 50,000,000
R 60,000,000
Rep
lacem
en
t V
alu
e (
CR
C)
Bulk supply Bulk waterpipelines
Reticulation Pump station Storage
Asset Group
1 - Very good
2 - Good
3 - Fair
4 - Poor
5 - Very poor
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1 - Accurate88%
2 - Minor Inaccuracies
6%
3 - Half Estimated
6%
Asset Knowledge
Level of Service(existing/desired)
Demand
Risk Management
Information and Data Collection
Affordability
Life-Cycle Plan
AM Plan Adoption
AM Practice Improvement Plan
5
4
3
21
9
8
Financial Plan76
Figure 6-9: Example - Remaining Useful Life Summary
R 0
R 20,000,000
R 40,000,000
R 60,000,000
R 80,000,000
R 100,000,000
R 120,000,000
Rep
lacem
en
t V
alu
e (
CR
C)
0-5 yrs 6-10 yrs 11-15 yrs 16-20 yrs > 21 yrs
Remaining Useful Life
Storage
Pump station
Reticulation
Bulk water pipelines
Bulk supply
Figure 6-10: Example - Data Accuracy Summary
6.3 Establishing Levels of Service
One of the most important jobs of an asset manager is to understand the service level gap, that is, the gap between
the service that is currently being provided by the network and the service that is desired by customers (and that
they are willing to pay for).
The customer needs and wants are only one input into setting levels of service; we also need to consider minimum
technical standards, legislative requirements, political requirements, as illustrated in figure 6-11.
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Figure 6-11: Levels of service
Customer needs
Legal/Constitutionrequirements
Political requirements
Desired levels of service
Current levels of service
Service level gap
AM Strategies to close gap
(O&M, capital works, etc)
Customer Research
This section describes the inputs to setting levels of service and provides a range of level of service examples for
each asset type.
6.3.1 Customer Consultation
As discussed in section 2, there is an existing consultation process that surrounds the development of each
municipality’s IDP. It is not the intention of these guidelines to suggest that the CMIP be developed or consulted
over through a separate process. Rather, this section describes:
• how the CMIP information can be used to support the IDP consultation process; and
• good practices relating to community consultation over infrastructure assets.
6.3.2 The IDP consultation process
Figure 6-12 expands on the diagram developed in section 5 to illustrate the consultation process that is required as
part of the IDP process, as recommended in the IDP Guidelines. The figure illustrates that the CMIP will provide
sound information on infrastructure service level options and costs to support the consultation process. In return,
though not explicitly shown in this diagram, the IDP will provide information into the IAMP/CMIP process on
demographic information, level of development and population forecasts which will assist the AM planning process.
The IDP is also likely to be the forum for deciding the preferred strategic options which will be adopted in the final
CMIP.
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Figure 6-12: IDP Consultation Process
Provides information on infrastructure service
level gaps in each area, risks and future demand
Analysislevel of development, access
to services, demographic information
IAMP/CMIP Process
Costed infrastructure options (lifecycle/tariffs
implications) to meet future strategic/level of
service scenarios
Appropriate timing and costing of projects
CMIP level of service and funding plan forecasts
IDP PROCESS
Public Consultation which supports IDP
Process
Development strategies and projects
Development objectives, strategies and options
Project Formulation
Integration of Programmes to IDP
Approval of IDP
Consultation to establish needs and priorities
Consultation to establish preferred options
Specific local and stakeholder consultation over project design and
impacts
Final opportunity for public comment on IDP
document and proposals
6.3.3 Selecting appropriate consultation approaches
The critical issue for anyone wishing to engage the community in decision is making the consultation process
accessible to all areas of the community and all customer types.
Of course, there are existing democratic forums where elected officials and designated committees can make
decisions on behalf of the community. These are valuable opportunities to engage with groups that are
knowledgeable on the issues concerned and may be able to provide more detailed and informed feedback on detailed
options proposed. However a truly effective consultation programme needs to reach the wider sections of the
community directly, particularly those who live remotely, are illiterate and may not usually have a voice in municipal
decision making.
Unfortunately too many consultation processes rely on public meetings or written submissions to planning
documents, both of which can get skewed representation by people who ‘can be bothered to participate’, i.e., those
that have special interests, and the results therefore may not reflect the values of the silent majority. On the other
hand, surveys can offer a more statistically valid approach and reach a broader cross-section of the community, but
the responses are more superficial and sometimes it is not easy to find out the issues (it might tell you people are
dissatisfied but not always what is at the heart of that dissatisfaction.
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Given the above discussion, it seems appropriate that a variety of consultation mechanisms are used, tailored to
ensure access to all the customer groups identified. Below is a brief summary of the pros and cons some of the
different approaches1 – a mixture of all of these should generally be used.
Community Forums and Public Meetings
• Provide the perception that the local voice is
being heard
• Opportunity to provide input in local area
• May not be a reliable way of getting feedback
representative of the entire community - does
the silent majority opinion differ from those
who attend
• Easy to get sidetracked off the central issues
(e.g.: to the problem of the footpath outside
someone’s house!).
Surveys
• Confidence that a wide representation of the
community is being reached.
• Quantified statistical results, for example on how
many people support a proposal
• some groups can still be excluded depending on the
interview methodology (e.g.: those without phones)
• Surveyed persons may not have an informed
understanding of the issues.
• Self completion surveys skewed to those interested
enough to respond.
Meetings with Special Interest Groups
• Clear focus and understanding of issues of
groups.
• Feeling of buy-in by groups.
• May be perception that special favors are
being granted to specific interest groups
• Usually need strong facilitation (an external
party may be useful) to ensure a balanced view
is obtained from the group.
Focus Groups
• Usually a randomly selected group people of people
invited to discuss issues and proposals, so no skewing
of special interests.
• Opportunity to discuss issues in more depth and
understand the underlying causes of dissatisfaction,
needs and priorities.
• Small number of people, so no statistically valid
results.
6.3.4 Selecting levels of service (performance indicators) that reflect customers key drivers
Having identified what the customer groups’ value, the level of service framework should be developed to take into
account key areas of concern and particularly where there are drivers for change, so that those changes can be
monitored over time.
6.3.5 Informing and educating the consulted parties
There are generally three stages at which we consult with our customers over levels of service, and at each of these
stages we need to consider whether the person is informed enough to provide the right input. The language used
needs to be tailored to the people being consulted, without being condescending. The three stages include:
i) At the preliminary stage the consultation is usually focused on identifying the person’s/community’s needs,
wants and issues relating to the service being discussed. This is often done through a mixture of
community and stakeholder meetings and surveys to identify areas of concern or dissatisfaction. The
information required at this stage is predominantly information on the purpose of the consultation and making
sure the person understands the scope of the services under review.
ii) Having identified key issues, officials will then come up with a list of proposals or scenarios to address the
issues. Of course, if you ask someone ‘do you want this better level of service’ they will always say yes. If
you ask someone ‘do you want a better level of service if it costs you X Rand extra per year, the answer may
be somewhat different? Therefore, in obtaining feedback on specific proposals to change levels of service,
people need to be informed of the benefits and negative impacts of the proposals, the impact in terms of cost
both to them and to the government. This makes it harder to rely solely on survey questions, which do not
1 Reference: Creating Customer Value from Community Assets, published by the National Asset Management Steering Group, 2002
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provide a good forum for providing information to people. Focus groups and stakeholder meetings become
more important inputs at this stage.
iii) Having received feedback on preferred options, officials need to consolidate these options into a planning
document that confirms the strategic objectives, timing for projects and funding plan (in the case of the
Municipalities, this is most likely to be the IDP). The plan itself provides a means of informing and educating
people, and making the plan open to public submissions is one method of consultation at this final stage.
However not all people have the time or ability to digest and comment on such documents.
It is here where the CMIP can add a lot of value to the IDP consultation process, by providing sound level of service
and cost options.
6.3.6 Understanding the trade-offs and priorities
In section 6.7 the need to prioritise projects is identified, with the level of community support being one important
factor in ranking how important that project is. There needs to be careful consideration when interpreting the results
when carrying out consultation for one sector in isolation from another. For example, the municipality’s facilities
department could carry out a survey asking whether people are prepared to pay for a new swimming pool for an
extra R 100 on their rates and get a strong Yes response. However if the same people were asked if they were
prepared to pay an extra R 500 for a swimming pool, new sealed roads and a local sold waste transfer station, they
might well say no.
6.3.7 Legal and regulatory requirements
National statutory requirements regarding the standards in each sector need to be observed (as noted in section 1.5
of the guide) as well as published sector guidelines and municipal standards.
6.3.8 Political Requirements
Government has in place several strategic objectives and actions plans that
affect municipal infrastructure delivery and management. These include,
amongst other, the eradication of backlogs and stimulation of economic
growth, through the Accelerated and Shared Growth Initiative - South Africa
(AsgiSA). This initiative is aimed at ensuring that poverty and
unemployment is halved by 2014 (from 2004 figures).
Infrastructure investment occupies a central position with AsgiSA, in
recognition of the jobs and economic opportunities that can be created
through infrastructure. Cabinet also in March 2006 adopted the National
Infrastructure Maintenance Strategy that strengthens AsgiSA, and
highlights the need for infrastructure maintenance and renewals.
6.3.9 Levels of Service
The determination of performance criteria, measures and targets for each service is pivotal to the effective
management of the service – it is a departure point for:
• financial sustainability (by linking the target standards of service with an assessment of long-term affordability to
the municipality);
• effective community consultation (the standards of service different customer groups can expect to receive now
and in the future);
• life-cycle planning (what new construction and upgrading of infrastructure is required and when, what outcomes
are expected from the operations, maintenance, and renewals interventions);
• risk management (what can happen to prevent the performance targets being met?); and
2012
2010
2008
2007 Bucket eradication
Basic water supply to all
Basic sanitation to all
Basic energy and refuse removal
Basic service targets
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• performance monitoring and reporting (what are the indicators that need to be monitored to report actual
performance and the resources required).
Criteria considered appropriate to the performance of each service have been selected, and simple measures
proposed, in the tables below. These measures can be adjusted and expanded to align with the strategic objectives
of each municipality, bearing in mind that each measure implies a need to establish a commensurate monitoring
system. The IIMM indicates the following range of performance categories that can be considered for different
services:
• accessibility
• quality
• quantity
• availability
• reliability
• cost/affordability
• comfort
• safety
• efficiency
• sustainability
• customer service (responsiveness, customer education etc)
The performance management system of the municipality, and its annual SDBIP, should be consistent with the
service criteria, measures and targets that are adopted.
Table 6-10: Example - Water Service Standards
Key service criteria Service level characteristic Performance measure Target performance level
1. Availability Customers’ access to basic
potable water infrastructure
Percentage of households with
availability of service of level 3 or
better (defined in the table below)
and system capacity exceeding 25
liters per person per day.
100%
2. Affordability Provision of Free Basic Water
Service (25 liters per person
per day) to the poor.
Percentage of indigent households
paying for basic water service
Nil
Number of households experiencing
service interruptions longer than 48
hours each year
Nil Service Interruptions
Number of households experiencing
an aggregate of service
interruptions more than 15 days per
year
Nil
3. Quality of Service
Flow Rate Number of households whose supply
has inadequate flow (formal
connections less than 6 kl per
month, and basic supply less than
10 liters per minute).
Nil
4. Water Quality Water quality meets legal
requirements
Percentage of tests taken in
accordance with SANS 241 that
meet the compliance requirements
100%
5. Consumption
Control
Metering Percentage of formal connections
that are metered
100%
6. Utilisation Bulk capacity Total operational through put at
Treatment Works as a percentage of
total process capacity
80%
7. Affordability Collection efficiency Percentage revenue collected 95%
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Key service criteria Service level characteristic Performance measure Target performance level
8. Financial viability Margin on total service Percentage gross margin 30%
9. Community value Change in value of community
assets
5 year rolling average increase or
decrease in immovable asset value
(corrected for inflation)
In accordance with
development vision.
Level Description Level of Service
1 None Natural resources
2 Sub Standard Water point more than 200m walking distance
3 Basic* Communal standpipe less than 200m walking distance
4 Intermediate Yard connections/yard tanks
5 Full Service House connections
* minimum requirement
Table 6-11: Example - Road Transport Service Standards
Key service criteria Service level characteristic Performance measure Target performance level
1 Availability Vehicular access of residential
and business erven to the road
network
% of total with level of service of
grade 3 or greater (refer grade
definitions in table below).
100% have vehicular access
2 Quality Extent of road failures and
distresses
Annual review of percentage of roads
in a poor (grade 4) or worse
condition.
Less than 10%
Bridge condition Condition grading less than “poor”
(grade 4)
Nil
Fatality rates Number of fatalities in the
municipality per year
Less than x per year
3 Safety
Vehicle and pedestrian accident
levels
Number of accidents reported per
year
Less than y per year
4 Community
value
Change in value of community
assets
5 year rolling average increase or
decrease in immovable asset value
(corrected for inflation)
In accordance with
development vision
Description*
Level Standard Pavement Structures
Safety
measures
1 None No service
provided/tracks
No service Nil
2 Sub Standard Earth roads Low-level crossings Rudimentary signage
3 Basic Gravel roads to within
500m of dwellings
Nominal structures and
culverts
SADC SARTSM compliant road signage
4 Intermediate
Service
Paved roads to within
500m of dwellings and
Gravel roads to each erf
Bridges over streams, and
some crossing over main
roads/rail
SADC SARTSM compliant road signage,
some footpaths and streetlighting
5 Full Service Paved roads to each erf No conflict to local road
users by other primary
road or rail traffic
SADC SARTSM compliant and pedestrian
safety measure around all highly trafficked
areas and streetlighting on high trafficked
roads
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Table 6-12: Example - Sanitation Service Standards
Key service criteria Service level characteristic Performance measure Target performance level
1. Availability Customers’ access to basic
level of sanitation service
Percentage of households with availability
of service of grade 3 or better (refer
table below)
100%
2. Service Quality Duration of service
interruptions.
No of reported blockages not repaired
within 24 hours
Nil
3. Health Effluent quality
Tests within DWAF license/permit
stipulations
100%
4. Sustainability Untreated discharge to natural
waterways
Number of overflows discharging to
natural waterways per year.
Nil per year
5. Community
value
Change in value of community
assets
5 year rolling average increase or
decrease in immovable asset value
(corrected for inflation)
In accordance with
development vision
6. Utilisation Bulk capacity Total throughput at Waste Water
Treatment Works as a percentage of
process capacity
Level Description Level of Service
1 None No formal service
2 Sub Standard Unventilated pit latrines, buckets, or communal VIP latrines
3 Basic On site ventilated improved pit latrine (VIP)
4 Intermediate On site Low flush waterborne systems
5 Full Service Full waterborne house connections
Table 6-13: Example - Stormwater Drainage Service Standards
Key service
criteria Service level characteristic Performance measure Target performance level
1. Availability Effective protection of property
to prevent damage
Number of erven that are
flooded, based on recorded
events or complaints received
No incidences each year (excluding where
rainfall exceeds 10 yearly maximum
rainfall intensity).
Provision of stormwater
service
% of population with > level 3
(refer table below)
80%
2. Health Drainage water not to be
polluted
% compliance with DWAF’s E-
Coli water quality guidelines
90% for vleis and coastal waters, 50% for
urban rivers
3. Safety Effective measures to prevent
loss of life or serious injury
Number of recorded incidents
(drowning, injury)
No incidents each year outside the
predicted annual disaster risk profile
4. Community
value
Change in value of community
assets
5 year rolling average increase
or decrease in immovable
asset value (corrected for
inflation)
In accordance with development vision
Level Description Level of Service
1 None No Stormwater Provision
2 Sub Standard Stormwater Provision in Roadway and ditches, not to a specific design
standard
3 Basic Unlined Channels to a minor system design standard of maximum 1:2 year
return period
4 Intermediate Service Lined Channels to a minor system design standard of maximum 1:2 year
return period
5 Full Service Kerbs, gutters and pipes and canal systems to a minor and major system
design standard of maximum 1:20 year period
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Table 6-14: Example - Solid Waste Service Standards
Key service criteria Service level
characteristic Performance measure Target performance level
1. Health Levels of dust, noise and
pollution, and pests at
landfill, transfer sites
Permit conditions or minimum
statutory requirements for
monitoring
100% compliance
2. Reliability Reliability of collection
service
Number of “erven – incidents” of
waste not collected on prescribed
day each year
Less than 5% of number of
erven
3. Availability Provision of a minimum
service
Percentage of respective population
with availability of service equal or
greater than (refer table below):
Grade 2 – Rural Areas
Grade 3 – Urban Areas
Reviewed annually
100% in both categories
4.
Bulk capacity Remaining Landfill Life Remaining licensed life (years) of
landfill facilities
Minimum 5 years
5. Utilisation Bulk capacity Total operational throughput at
Treatment Works as a percentage
of total process capacity
80%
Level of
Service Description Container Collection point Frequency of collection
0 No waste is collected by
a formal system
No containers supplied
for waste storage
Generator disposes of
waste at own discretion
Generators decide individually
1 Generators dump waste
at a communal point
No containers are
supplied for the dumping
of waste
An open area or street
corner within 200 meters
of generators
Dumped waste is loaded with
front loaders onto tipped trucks at
more or less monthly intervals
2 Generators dump waste
in mass containers at a
communal site
Bulk containers (3 – 21
m3) are provided for
storage of waste
Communal site either
prepared or open piece
of land within walking
distance (200 m)
Containers are emptied with
specialized vehicles when full but
not less than two weekly
3 Generators contain waste
on site in their own
containers and put these
out for collection
Containers with lids (80
liters up to 1100 liters)
Full containers are left on
the side walk or pre-
selected point for
collection
Specialized waste collection
vehicles collect waste from
containers at specified intervals
varying from daily to not less than
weekly
4 Generators contain waste
on site in containers
supplied by the
municipality and put
these out for collection
Containers with lids (80
liters up to 1100 liters)
and bulk containers with
or without lids (3 – 21
m3)
Full containers are left on
the side walk or pre-
selected point for
collection
Specialized waste collection
vehicles collect waste from
containers at specified intervals
varying from daily to not less than
weekly
5 Generators participate in
waste minimization
schemes
Separate containers with
lids (80 liters up to 1100
liters) and bulk
containers with or
without lids (3 – 21 m3)
for waste and reclaimed
material
Full containers are left on
the side walk or pre-
selected point for
collection by either
municipality or recyclers
Specialized collection vehicles
collect waste and recyclable
material from containers at
specified intervals varying from
daily to not less than weekly
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Table 6-15: Example - Electricity Service Standards
Key service criteria Service level characteristic Performance measure Target performance level
1. Availability Access of households and
business erven to at least
basic service
Percentage of households and
business erven with
availability of service of grade
3 or greater (refer table
below)
100%
Unscheduled: 10-12
hours/year
Duration of power outages Monitoring of outage periods.
Restoration:
30% within 1.5 hours
60% within 3.5 hours
90% within 7.5 hours
98% within 24 hours
Scheduled: 6 hours/year
Unscheduled: 4-10 per year
depending on category of
network
2. Reliability
Frequency of outages Frequency of outages in a
given period.
Scheduled: 2 per year on
overhead networks & 1 per
year for underground network
3. Quality Excursions of parameters such
as frequency, voltage, etc
outside the statutory
boundaries as set out in NRS
048 & 047
Monitoring of the parameters
by recorders or electronic
energy meters
Frequency: ± 5Hz
Voltage: ± 10%
4. Utilisation Bulk capacity Total power used as a
percentage of power available
According to Asset
Management Plan
5. Utilisation Bulk capacity Total operational throughput
at Treatment Works as a
percentage of total process
capacity
80%
Level Description Level of Service
1 None Open fires, paraffin stoves, coal stoves & candles
2 Sub Standard Un-metered, illegal connections, unsafe
3 Basic Electricity connected & metered/pre-paid, single point load (e.g. “Ready board”)
4 Intermediate Service Electricity connected & metered/pre-paid, distribution board with permanent
wiring
5 Full Service Electricity connected & metered, distribution board with permanent wiring to
fixed outlets
Table 6-16: Example - Parks Service Standards
Key performance
indicator
Service level
characteristic
How performance is measured Target performance level
1 Availability Provision of parks and
cemetery facilities
X Ha of parks of each standard,
(refer table below) e.g.: 100 ha level
1
100%
Prevention of injury to
users of the facilities
Compliance with OHS requirements 100% 2 Safety
Security to users against
theft or assault
Number of users experiencing an
incident of theft or assault per year
Nil
3 Quality Condition of ablution
facilities
Condition Grade No areas less than Grade 3 (fair)
4 Community value Change in value of
community assets
5 year rolling average increase or
decrease in immovable asset value
In accordance with development
vision
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Key performance
indicator
Service level
characteristic
How performance is measured Target performance level
(corrected for inflation)
Level Description Level of Service
1 None Open field
2 Sub Standard Open field fenced off with grass cutting – 3 monthly
3 Basic Fenced off with defined maintained lawn area and some shrub gardens
4 Intermediate Service Fenced off with maintained lawn areas and shrub gardens with walkways and ablution
facilities with lit walkways
5 Full Service Fenced off with maintained lawn areas and shrub gardens with automatic sprinkler
systems, walkways with garden formation and play apparatus and ablution facilities
and full garden lighting
Table 6-17: Example - Building Service Standards
Key performance
indicator
Service level
characteristic
How performance is measured Target performance level
1 Availability Customers (mostly
internal) have adequate
accommodation available
for desired purpose
Customer complaints 100% of requirements are met
2 Affordability Provide accommodation at
market related prices
Annual audit of cost per m² In line with market rates
Number of unplanned
maintenance actions
Number of unplanned maintenance
activities required per 6000 m² floor
area per month
Less than 2 3 Reliability
Response time for
unplanned maintenance
actions
Completion within 3 working days 100% compliance
4 Health and Safety Meet legislated
requirements
Comply with all OHS and SANS 0400
(NBR) requirements
100% compliance
5 Community value Change in value of
community assets
5 year rolling average increase or
decrease in immovable asset value
(corrected for inflation)
In accordance with development
vision
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Asset Knowledge
Level of Service(existing/desired)
Demand
Risk Management
Information and Data Collection
Affordability
Life-Cycle Plan
AM Plan Adoption
AM Practice Improvement Plan
5
4
3
21
9
8
Financial Plan76
6.4 Demand
6.4.1 Factors influencing demand
Demand can, and often will, change over time depending on a number of factors, as summarised in Table 6-18.
Table 6-18: Factors influencing Demand
Factor Examples
Basic increases/decreases in demand
• Population growth/decline and dispersion
• Business/economic growth and changes
• Land use changes, e.g. intensification
Changes in unit demand
These relate to higher consumption of infrastructure services by
individual persons, households, businesses and institutional users over
time.
Changes in customer expectations
• Better safety, less delay, smoother travel
• Cleaner water, higher pressure
• Environmental consciousness
In order to better forecast the impact of demand factors, the following key trends need to be considered:
Economic trends
These include economic growth or decline within the area under consideration that will impact on, amongst other:
• Economic investment/disinvestment
• Expanded/contracted job opportunities
• Economic structuring, i.e. corporatisation, outsourcing and workforce mobility
Social trends
There are numerous and often complex social trends that influence future demand. Some of these include:
• Household size and population growth
• Education levels
• Increased working hours
• Lifestyle issues and preferences
• Travel and improved mobility
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• Diseases, notably HIV/AIDS, the impact of which are accelerated through greater human interaction
Environmental trends
These include issues such as global warming and the depletion of scarce natural resources.
Technological trends
Advances in technology generally lead to more efficient and cost effective service delivery, as well as alternative
service offerings.
6.4.2 Demand Management
Demand management is an active intervention to curb consumption of infrastructure services in response to factors
such as:
• insufficient bulk resources;
• over-utilisation of infrastructure at certain times (e.g. peak traffic or electricity consumption on winter evenings);
• funding constraints;
• theft and vandalism; and/or
• insufficient infrastructure capacity.
Non-asset solutions that can be employed to actively manage demand are outlined below in Figure 6-13:
Figure 6-13: Demand management options
Non-asset solutions Regulatory based
Cost based
Co-operatively based Educational
Restrictions
Demand substitution
Incentive based
Demand management options
6.4.3 Demand Profile
Having identified the key demand factors, and considered the impact of demand management interventions, a profile
of future service demand can be quantified. This profile will dictate the nature, location, and extent of future
infrastructure needs that need to e addressed in the Life-Cycle Plan. Figure 6-14 is an example of how bulk
infrastructure will need to be augmented to cater for increased water demand over a 10 year period.
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Asset Knowledge
Level of Service(existing/desired)
Demand
Risk Management
Information and Data Collection
Affordability
Life-Cycle Plan
AM Plan Adoption
AM Practice Improvement Plan
5
4
3
21
9
8
Financial Plan76
Figure 6-14: Infrastructure Enhancement Needs Driven by Future Demand Profile
6.5 Risk Management
If the municipality has a formal corporate risk management policy, the prescribed processes and techniques should
be adopted in the IAM Planning exercise.
All municipalities are required to prepare a Disaster Management Plan (DMP) in terms of the Disaster Management
Act. Disasters are defined in the plan as events that cause death or disease, or damage to property, infrastructure or
the environment, or disrupt community life, and “exceed the ability of those affected to cope with its effects using
their own resources”. The plan focuses on preparedness for emergency response (for example to accidents and
natural disasters), and includes a mechanism to mobilize available local resources, and, where necessary, to escalate
by referring incidents to a Disaster Management Centre at the District, Provincial, or National level. The DMP
indicates that the risk assessment should be reviewed every year, and conducted afresh every two years. The DMP
has to be included in the municipality’s IDP and Council is obliged to address all identified mitigation actions. The
infrastructure risks identified in the IAMP should inform the reviews of the DMP.
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
2006/0
7
Financial year
Kilo
litr
es
DemandBulk raw water capacityReticulation capacityCapacity for Bulk PipelineCapacity of Treatment Works
2007/0
8
2008/0
9
2009/1
0
2010/1
1
2011/1
2
2012/1
3
2013/1
4
2014/1
5
2015/1
6
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The risk management process needs to be tackled at two levels, as follows:-
• at network level, identify events that could impact on the performance of the service. Focus on identifying risk
events that will have a major consequence (if there is no separate corporate risk plan, the exercise should
include some key corporate risks); and
• at asset level, identify the most significant events that could cause critical assets to fail (or cease to function
adequately).
The approach is as follows:
• identify risk events;
• determine the municipality’s exposure to each risk event; and
• determine an appropriate response to each risk event.
6.5.1 Risk Identification
Risk events should be identified by officials who are familiar with the assets and their operating environment. This
can be done by an individual, but there are benefits in discussing potential risk events on a collective basis. Table 6-
19 is a schedule of commonly encountered risks that can be used to stimulate discussion of potential risk events.
Table 6-19: Commonly Encountered Risks
Condition-based failure
Vandalism
Theft/illegal connections
Physical
System losses
Operator error
Misuse
Theft
Sabotage
Inadequate safety measures
Insufficient skills & capacity
Delays in contracts
Operational
Under or over utilisation
Inadequate planning
Inadequate data
Inadequate systems capability
Inadequate design
Fitness for purpose
Inadequate construction standards
Insufficient infrastructure capacity
Infrastructure obsolescence
Technical
Inadequate maintenance
Natural/environmenta Flood
Inadequate CAPEX budget
Inadequate OPEX budget
Inefficient collection
Prohibitive O&M costs
Financial
Unforeseen budget cuts
Poor morale
Inadequate or cumbersome
processes
Ineffective strategic leadership
Institutional
Unclear targets/goals
Change in expectations Social
Change in demand
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Drought
Storms
Sinkholes
l
Fire
Loss of rights/license
Change in legislation
Legal
Fines
Power cuts
Availability of consumables (e.g. diesel,
chemicals)
Availability of parts supplies
Reliability of bulk
Quality of bulk
External
Capacity of bulk
6.5.2 Consequences of Risk Events
A consequence rating has to be allocated to each risk event. Whilst sophisticated techniques exist that attempt to
quantify these consequences, a more qualitative approach is often more practical, using a guide such as shown in
table 6-20. Consequence tables are very specific to the size and type of assets, and organisational needs – thus the
table should be developed with inputs from senior management of the municipality.
Table 6-20: Example Risk Consequence Rating – Network Level
Consequence
Rating
Qualitative
Description
Direct costs
(repair, lost
income, third
party
damage)
Service
delivery
performance
Effect on public
health, safety
and property
Environmental
Damage
Municipal
Image
1. Insignificant Is readily
absorbed under
normal
operating
conditions
<R20,000 Less than 50
customers
without potable
water for up to
8 hrs
No health or
safety impact,
minor property
damage
Minor transient
environmental
damage, visual
effects only
Individual interest
only, no community
concern
2. Minor Can be
managed under
normal
operating
conditions
R20,000-
R100,000
Less than 50
customers
without water
for up to 24
hours
Minor health
impact on small
number of
people
Minor damage to
environment,
longer effect
Minor community
interest, minor local
media report
3. Moderate Can be
managed but
requires
additional
resources and
management
effort
R100,000-
R500,000
Less than 50
customers
without potable
water for up to
48 hrs
Serious health
impact on small
number or minor
impact on large
number of
people
Moderate
environmental
damage, local
importance
Public community
discussion, major
local media interest
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Consequence
Rating
Qualitative
Description
Direct costs
(repair, lost
income, third
party
damage)
Service
delivery
performance
Effect on public
health, safety
and property
Environmental
Damage
Municipal
Image
4. Major Will have a
prolonged
impact and
extensive
consequences
R500,000-
R5,000,000
More than 50
customers
without potable
water for a
period of over
48 hours
Extensive
injuries or
significant health
impacts, single
fatality
Major long term
environmental
impact.
Prosecution
expected
Major loss in
community confidence
5. Catastrophic Irreversible and
extensive
impacts, or
significantly
undermining
key business
objectives
>R5,000,000 More than 500
customers
without potable
water for a
period of over
48 hours
Multiple fatalities Serious damage
of national
importance and
irreversible
impact.
Prosecution
expected.
National media
In asset management planning, a specific risk event that is central to decision-making is asset failure. As noted in
the Asset Register section, a criticality index is determined for each asset by contemplating the consequence of
failure of the asset aggregated across the following potential outcomes:
• health and safety;
• financial losses;
• service delivery performance; and
• environmental impacts.
6.5.3 Probability of Risk Events
A probability rating is allocated for each risk event. Whilst statistical probabilities may be used, municipalities may
find it more practical to use subjective criteria, as indicated in Table 6-21 and 6-22.
Table 6-21: Probability Rating- Network Level
Rating Probability Qualitative Description
A Rare May occur only in exceptional circumstances
B Unlikely Will probably not occur
C Moderate Could occur at some time
D Likely Will probably occur
E Almost certain Is expected to occur
The probability of condition-based failure of assets is guided by the following:
Table 6-22: Probability Rating- Asset Level (condition-based failure)
Rating Probability Condition
A Rare Very Good
B Unlikely Good
C Moderate Fair
D Likely Poor
E Almost certain Very Poor
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6.5.4 Risk Exposure
The risk exposure of a municipality to a particular event can be considered to depend 0on the consequences and the
probability of that event. A matrix such as the one indicated in Table 6-23 can be used to rank events as low,
moderate, significant or high risk exposure to the municipality.
Table 6-23: Risk Exposure Matrix
Consequence
1 I
nsi
gn
ific
an
t
2 M
ino
r
3 M
od
era
te
4 M
ajo
r
5 C
ata
stro
ph
ic
Risk Exposure
A Rare L L L M M L LOW
B Unlikely L L M M S M MODERATE
C Moderate L M M S H S SIGNIFICANT
D Likely M M S H H H HIGH
Pro
bab
ilit
y
E Almost certain M S H H H
The risk matrix provides a means of combining asset criticality and condition data, pointing to priority interventions
required for renewal of assets.
6.5.5 Risk Responses
The following approach is an example of how municipalities may decide on appropriate risk responses:
L = Low Risk Exposure: Manage through routine procedures.
M = Moderate Risk Exposure: Mitigation action to be explored and implemented if benefit-cost is
demonstrated.
S = Significant Risk Exposure: Options reviewed and specific risk mitigation actions identified in the IAMP
for implementation.
H = High Risk Exposure: Action to reduce risk taken immediately.
6.5.6 Network-level risk exposure
Figure 6-15 indicates a distribution of a municipality’s assets in each criticality grading. As a general guide, the total
value of assets in the critical and important categories should not be more than around 20%. Means of reducing the
risk exposure should be explored by examining the needs at asset level, focusing on mitigation actions for each
critical/important asset.
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Asset Knowledge
Level of Service(existing/desired)
Demand
Risk Management
Information and Data Collection
Affordability
Life-Cycle Plan
AM Plan Adoption
AM Practice Improvement Plan
5
4
3
21
9
8
Financial Plan76
Figure 6-15: Asset Criticality Distribution
R 0
R 20,000,000
R 40,000,000
R 60,000,000
R 80,000,000
R 100,000,000
R 120,000,000
Rep
lacem
en
t V
alu
e (
CR
C)
1 - Critical 2 - Important 3 - Non-critical
Asset Criticality
Storage
Pump station
Reticulation
Bulk waterpipelines
Bulk supply
6.5.7 Risk Register
An example of a Risk Register which identifies risk events and indicates the assessment of risk exposure before and
after proposed interventions is included as Annexure B.
6.6 Life-cycle Plan
The life-cycle plan is a considered response to the needs
identified in the preceding elements of the IAM Plan (i.e.
the municipality’s strategic vision, the Level of Service
gaps, the pattern of future demand and demand
management interventions, and service delivery risks).
The plan will indicate the approach adopted by the
municipality in managing the lifecycle of each asset type
(e.g. when replacement/renewal is done, how new
projects are identified and prioritised, O & M practice,
contracted out or in-house resources, adopted standards,
whether labour intensive methods are used etc.).
Initially this may mean simply documenting the way
things are done at present and in later IAM plans stating
formally adopted strategies. One of the key outputs from the risk assessment will be the identification of priority
needs for capital renewal. The plan will indicate currently committed capital projects (from the current 3 year MTEF
budget), projects identified in the current IDP, and link these to the identified needs (growth, risk mitigation,
increase in level of service), making adjustments to the project scope and timing as may be necessary, and
identifying the project needs over the balance of the planning period (10 to 20 years). The linkage of each project to
each need will be documented in this section of the plan. The projects will include new construction, upgrading, and
capital renewal.
Multi-term budget forecasts are prepared for the planning period using some form of financial modelling. Typically a
unit rates approach is used, though the level of sophistication can vary depending on the accuracy required by the
municipality. The unit rates need to be appropriate to the particular local environment, and take into account that
renewal costs may be materially different to new construction. Annexure C provides examples of unit rates.
Alternative asset solutions to addressing each need should be examined in the IAMP and the optimum solutions
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reflected in the overall budgets (though, from a practical point of view, this may only be done for projects beyond a
threshold value). The detailed technical response to each need will be examined in more detail at project level (i.e.
as part of the project preparation phase – using life-cycle costing as a tool).
There are numerous factors that can influence the level of operations and maintenance effort (and therefore budget)
required. These include locality–specific issues such as geotechnical conditions, climatic conditions, social conditions,
standards of design and construction, economy-of-scale, spatial distribution etc. The budget should be informed by
an O&M Plan (drawn up separately and summarised in the AM Plan) that is consistent with the performance criteria
and risk assessment. Ideally it should point to the resource required to support the strategies determined for each
asset type. As a minimum, it should cite any need for budget adjustment based on the assessed risk associated with
current budget and O&M practices, and motivate the need for the preparation of an O&M Plan. A rational strategy
would be that preventative maintenance should be exercised (at least) on critical assets and perhaps a lower level of
preventative maintenance on important assets.
Annexure D provides an example schedule of annual operations and maintenance budgets that municipalities can
use to estimate the future impact of new construction. As indicated above, there is wide variation of actual O&M
needs (perhaps half or double the figures indicated), and so the example figures should be regarded in this context
and adjusted as appropriate for the specific context of the municipality. If all municipalities measure and report
maintenance in a consistent fashion, meaningful benchmarks may be able to be assembled over time. Figure 6-16
is an example of a ten year financial forecast of the life-cycle budget needs for an infrastructure network.
Example of a first basic Life-cycle Plan – Footpaths:
Asset Information
The municipality aims to provide a safe, comfortable and efficient network and facilities catering for pedestrians
(including the physically disabled).
Key issues are:
• the on-going deterioration of footpath assets due to inadequate maintenance, which is diminishing the quality of
service to pedestrians, resulting in safety issues in high use areas (mainly the commercial area and around schools);
• low levels of footpath maintenance and resurfacing may be increasing lifecycle costs - there is a need to define
maintenance standards;
• there is a need to provide more new footpaths and disabled crossings to meet community expectations and the
municipality’s strategic objectives;
• footpath reinstatement following excavation by underground service authorities and damage by heavy vehicles; and
• assessment of cost effective repair techniques.
The municipality owns 46 km of footpaths, mostly of concrete construction with an estimated replacement cost of
R8.3 million. Footpath information is stored on an Excel spreadsheet, with data on location, length and side of the
road, but no condition information. However current overall footpath condition is considered inadequate on the basis
the volume of resident complaints and observations, resulting in performance deficiencies relating to:
• ssafety - the risk of tripping due to surface irregularities (potholes, tree roots, cracks, depressions, etc.) is too high;
• appearance - generally substandard because of patching, weed growth and deterioration;
• availability - as many as 80% of residential streets do not have any footpaths, and there are insufficient cut-down
crossings to allow easy passage for the disabled.
Management Strategies
The life-cycle management strategies currently used by the municipality for footpaths are summarised below.
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• Routine maintenance such as crack repairs, joint/ crack leveling and growth removal are undertaken largely on a
reactive basis in response to complaints. This is due to the severe constraint on funding. Improved practices will be
introduced to be more proactive with condition assessment and planned repairs to improve the overall standard of
service provided by footpaths. Repairs are implemented by municipal staff.
• The Supervisor is responsible for the identification of renewals, with priority based on safety issues (differential
settlement/ cracks), condition and utilisation levels. A renewal being defined as the replacement of more than 10
meters of footpath.
New footpaths constructed by private developers are transferred to the ownership of the municipality when accepted as
being of a satisfactory standard.
Work Programme
a) Historical Expenditure
Figures on footpath maintenance expenditure are not available. No footpath renewals have been undertaken over the past
8 years, and all resources have been applied to urgent maintenance works.
A footpath construction programme from 1994 to 1997 built 2 km of footpath per year.
b) Maintenance Forecast
Maintenance expenditure on footpaths needs to increase significantly to address a large backlog of condition related
defects. Footpath maintenance expenditure is included in the financial summary assuming the current allocation for
footpath is increased by an additional R100,000 pa to catch up on maintenance work.
The introduction of a job costing system will enable full footpath specific forecasts to be included in the next version
of this plan.
c) Renewal Forecast
Well-maintained concrete footpaths will have a life expectancy in excess of 50 years if adequately maintained.
However, about 10% of the footpaths require replacement. The forecast provides for R150,000 pa as an initial
allocation, to be reviewed once a more detailed review of the needs has been done.
d) Development Forecast
The municipality’s Strategic Objectives and the desires of the community (as expressed in the consultative process of the
IDP) led to the establishment of an ongoing development programme, and the capital forecast provides for:
• new footpaths - R360,000 pa for footpath extensions;
• disabled crossings - R40,000 pa to construct 3 new crossings; and
• bus and taxi shelters - R120,000 pa to upgrade 4 new shelters.
There has been no private developer construction in the last 10 years, though new construction of some 8 kms of footpath
is envisaged in the next 4 years (which will require an adjustment of the maintenance allocation).
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Figure 6-16: Example of Life-cycle Budget Needs
R 0
R 5,000,000
R 10,000,000
R 15,000,000
R 20,000,000
R 25,000,000
R 30,000,000
Annual Budget
Needs
06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16Year
Planning Capital Renewals Operations & Maintenance New & Upgrading Works
The unit rates, O&M estimates, and Expected Useful Life figures can be used to determine the life-cycle cost of
infrastructure, as indicated in the example in Table 6-24 for a new 15kW raw water pump station (excluding cost of
finance):
Table 6-24: Life Cycle Cost Example (50 year period)
Cost element Calculation Amount
Development
Civil Works 15 x R8,251/kW (see example unit rates) R 123,765
Mechanical Plant 15 x R15,678/kW (see example unit rates) R 235,170
Electrical Plant 15 x R10,315/kW (see example unit rates) R 154,725
a)
Sub-total R 513,660
Annual Operations
Civil Works 0.06% x R123,765 (see O&M estimation – Annexure C) R 74
Mechanical Plant 3% x R235,170 (see O&M estimation – Annexure C) R 7,055
Electrical Plant 2% x R154,725 (see O&M estimation – Annexure C) R 3,095
b)
Sub-total R 10,224
Annual Maintenance
Civil Works 0.44% x R123,765 (see O&M estimation – Annexure C) R 545
Mechanical Plant 4.6% x R235,170 (see O&M estimation – Annexure C) R 10,818
Electrical Plant 2.3% x R154,725 (see O&M estimation - Annexure C) R 3,559
c)
Sub-total R 14,921
Renewal
Civil Works (renewal only after 50 years) Nil
Mechanical Plant 3 x R235,170 (3 renewals at years 15, 30 and 45) R 705,510
Electrical Plant 3 x R154,725 (3 renewals at years 15, 30 and 45) R 464,175
d)
Sub-total R 1,169,685
Life-Cycle Cost (over 50 years)
Development (subtotal of (a)) R 513,660
Operations R10,224 x 50 (subtotal of (b) over 50 years) R 511,193
Maintenance R14,921 x 50 (subtotal of (c) over 50 years) R 746,053
Renewals (subtotal of (d)) R 1,169,685
e)
Less residual value 10/15 x (R235,170 + 154,725) (10 years life of mechanical and electrical plant remaining) -R 259,930
TOTAL R 2,680,661
Assessment of the life-cycle costs of specific assets can be used to inform decisions between alternative solutions for
new infrastructure or replacement/rehabilitation options.
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Asset Knowledge
Level of Service(existing/desired)
Demand
Risk Management
Information and Data Collection
Affordability
Life-Cycle Plan
AM Plan Adoption
AM Practice Improvement Plan
5
4
3
21
9
8
Financial Plan76
6.7 Financial Planning
6.7.1 Introduction
Most municipalities will in any given financial year identify a number of capital projects. These capital projects have
the purpose of enhancing the municipality’s ability to provide services, or to strengthen the municipality’s economic
potential. This is done through the creation of new infrastructure or through infrastructure upgrades (such as the
widening of a road or a process improvement in a water treatment works).
Each of these projects will typically require a capital investment
(such as construction costs), after which the asset will require
operational expenditure to protect the condition of the asset and
to provide service benefits, as well as periodic renewals that
require further capital injections. Some of these assets may
provide the municipality with a constant revenue stream (typically
water and electricity assets), whilst others will not (such as
roads). However, the municipality needs to be sure that it can
afford all the lifecycle costs that will be incurred by the asset, not
just the up-front investment. For this purpose, every project
proposal must be accompanied by a financial forecast to
determine the financial sustainability of the asset.
A financial forecast will illustrate all the expenditure to be incurred during the asset’s lifecycle, and all revenue that
will realised as a result of the asset being operated. As mentioned, not all assets or infrastructure services will
financially viable in their own right, meaning that there will be insufficient income generated from the use of the
asset to offset the expenditure associated with that asset. By combining the income and expenditure requirements
of all infrastructure assets across the major services one can determine the surplus income generated by some
services, and the extent to which those surpluses can be used to subsidies expenditure in other services.
Most often the combined capital cost of identified projects in a given financial period will exceed the availability of
capital with which to finance them. This means that projects must be prioritised within budget constraints. Because
projects are often of a dissimilar nature, decision-makers often grapple with objectively evaluating and prioritising
projects. How, for example, do you compare a roads renewal programme to the building of a community hall?
Which of these projects will provide the municipality with the most benefits? At the heart of good AM planning is a
sound decision making framework that makes sure existing assets and service levels are maintained – any decision
to the contrary would breach the sustainability requirement. And that when investments are made in new services,
the first projects are those that give most benefit for each Rand invested. The municipality must also be sure it can
afford the ongoing operational cost associate with the asset,
This means that a municipality must not only consider the financial impact of the proposed solution; it must also
consider broader matters such as the achievement of social objectives. For example: a project for the provision of
sanitation facilities to villages largely populated by indigents may not be financially feasible in its own right, as the
beneficiaries thereof may not be able to sufficiently contribute to the operating expenditure required to operate and
maintain those facilities. However, Council policy (and indeed National legislation) may require that all residents
enjoy a minimum standard of living that allows for basic human dignity. In such a case the project may be approved
on the basis of social and legal considerations, but at a sector level (IAMP) and corporate level (CMIP) there needs to
be a check to ensure that sufficient financial strength exists within the municipality to subsidies programmes and
services that do not generate revenue. There needs to be a logical, transparent process for deciding on these and
other priorities.
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Therefore, a municipality must have in place a system of optimised decision-making, where the most appropriate
solutions or projects are identified that will provide the best benefit to the community. This system consists of:
• a process and tools that define infrastructure service problems, and presents possible solutions or projects;
• a process for preparing revenue and expenditure forecasts (and, where appropriate, loan obligations) that
quantifies the financial impact on the municipality and the community (usually in the form of tariff adjustments);
• a process and tools for analysing the financial merit of projects, using financial analytical indicators; and
• a framework for the evaluation of proposed solutions or projects in terms of meeting legal requirements and
Council’s policy objectives (i.e. financial sustainability, risk exposure, community support and legislative
compliance).
This sub-section provides a framework – as illustrated in Figure 6-17 -, process and tools to assist municipalities to:
• sift through the merits of competing project proposals within a given sector;
• develop a revenue and expenditure forecast for a project proposal;
• perform financial analysis of the project; and
• assess the benefits and costs of project based on multiples criteria, including financial, legal and social
considerations;
with a view to selecting those projects that will provide the most benefits to the municipality within existing budget
constraints.
Figure 6-17: Investment decision process
Prepare project proposals for initial evaluation
Initial sifting of project proposals
Decide on (ODM) system for project evaluation
Detailed assessment of selected individual project proposals
Feasibility study
Perform financial analysis
Selection of final list of sectorprojects based on financial, legal
and social considerations
Selection of final list of municipal projects based on financial, legal
and social considerations
Include projects in the IDP and MTEF
≅ Legislative requirements≅ Municipal vision & mission≅ Infrastructure asset
management policy
Budg
et c
onst
rain
ts
Needs:≅ Community needs≅ Legislative compliance
(i.e. 48 hour water supply assurance)
≅ Technical needs (i.e. refurbishment, technological improvements) Prepare revenue and
expenditure forecasts
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6.7.2 Decide on an ODM system for the municipality
Optimised Decision Making is defined in the NAMS guidelines2 as “a formal process to identify and prioritise all
potential solutions with consideration to financial viability, social and environmental responsibility and cultural
outcomes”. The NAMS ODM Guidelines propose that there are two broad methods of carrying out ODM, namely:
• a financial assessment which assesses the benefits and costs in Rand terms (described in section 6.7.3). In
some cases the results of this financial assessment will be the method of prioritising projects, such as by
selecting projects in order of highest Benefit-Cost Ratio (BCR).
• a multi-criteria analysis (MCA) whereby
each project is scored against a number of
criteria, each with different weightings, to
come up with an overall ranking (examples
are illustrated in sections 6.7.4 and 6.7.5).
Usually the results of the financial
assessment are one element in the MCA.
It should be recognised that these ODM methods
can be applied at many levels, and that the focus
in this section is on the sector and organisational
level optimisation as illustrated in Figure 6-18.
The type of ODM method applied will obviously influence how projects are evaluated. For purposes of this Guide both
methods described above are explained, though municipalities are advised to use the multi-criteria analysis for
deciding on projects proposed between different sectors (the corporate level). The reason is that a municipality must
not only consideration the financial outcomes of a project, but also legal, governance and social issues such as risk
exposure, community wishes and other intangible matters. How to do this? The infrastructure asset management
policy of the municipality will provide key policy principles (see Section 2.3) that could be used to develop criteria
against which projects can be assessed. For the purpose of this Guide, a simple set of four criteria have been
adopted that will be applied to illustrate how to optimise decisions between various infrastructure projects. These
criteria are:
• level of support from the community (based on consultation) – the higher the level of support, the higher the
score allocated;
• meeting of legislative requirements – where the project meets legislative requirements, it scores full marks in
this category, and every project (such as renewals) that protects the condition of assets and therefore service
sustainability, also scores full marks;
• risk exposure – the higher a project’s contribution to decreasing the municipality’s risk exposure, the higher the
score obtained; and
• financial justification, where the higher the justification, the higher the score achieved.
The application of these criteria using both the BCR and MCA approached are discussed on the following sub-sections.
6.7.3 Needs identification
An infrastructure project aims to satisfy a particular need. Such as need may originate from:
• the community expressing a service requirement, for example that a particular road must be paved;
2 Optimised Decision Making Guidelines, published by the New Zealand National Asset Management Steering Group, 2004.
Organisation level
Sector level
Project level Find the optimal solution to address a particular need
Identify the highest priority projects within a sector
Identify the highest priority projects across all sectors in the municipality
Figure 6-18: Levels of ODM
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• a technical requirement, such as the need for a process upgrade in a water treatment works that experiences
high raw water turbidity; or from
• a legal requirement, such as the need to have a 48 hour water storage supply on hand.
An initial needs identification will typically not provide detailed information about the project’s financial
requirements, revenue potential or technical design, as an initial decision must be made whether the proposal is
worthy of consideration, and whether funding should be committed towards a feasibility study and technical design.
Therefore the initial proposal will typically indicate the following:
• Problem description or opportunity;
• Particulars of the proposal (i.e. location, timeframe and costs);
• Alternative solutions; and
• Perceived benefits, potential risks and other considerations – these are mostly based on engineering judgment
rather than detailed research and planning;
Using the example of the requirement for a 48-hour water supply assurance, a project proposal could contain the
following information:
Project proposal: Construction of a 10 Ml reservoir at Kloofnek
1. Description of problem or opportunity
The Water Services Act requires the availability of a 48 hour water supply as a buffer against supply interruptions.
Phenomenal growth in urban households in the past 2 years has led to a drop in storage to the 42 hour mark. Once
the housing project in the neighboring Akwanang is complete, this level will further drop to 36 hours. Given the
current drought, and intermittent bulk supply issues, the municipality is particularly exposed to supply risks.
2. Possible solutions
2.1 Option 1: Construct a 10 Ml reservoir at Kloofnek
A 10 Ml reservoir could be constructed at an approximate cost of R 9 million, and commissioned within 14 months.
This will increase storage capacity to 60 hours that will provide sufficient capacity until 2010.
Criteria: Reasons:
Level of community support Not applicable – technical consideration
Legislative compliance Compliance with the Water Services Act
Risk exposure Decreased risk to water supply availability
Financial justification Not applicable
2.2 Option 2: Reduce water losses
A 10% reduction in water losses could be achieved through selective replacements in the reticulation network, at an
estimated cost of R 4.5 million. This will temporarily reduce demand, thus partly correcting the storage capacity
situation, and will lead to cost savings in the longer run. It will however not solve the increased demand for water,
driven by new household formation.
Criteria: Reasons:
Level of community support Not applicable – technical consideration
Legislative compliance Compliance with the Water Services Act
Risk exposure Decreased risk to water supply availability
Financial justification Not applicable
Recommendation: Proceed with Option 1 (legal compliance; appropriate response to increased demand)
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6.7.4 Initial sifting of project proposals
The project proposals are sifted based on the merits and impact of the problem described and solutions offered, as
well as the meeting of organisational criteria as reflected in the optimised decision making system (level of
community support, legislative compliance etc.). Projects that passed this initial screening phase are deemed worthy
of the time and resources required for more detailed assessment.
6.7.5 Detailed assessment of projects: preparation of financial forecasts
A financial forecast projects all revenue and expenditure associated with the project over the lifespan of the asset.
The forecast will indicate whether the asset or service will realise surplus revenue or incur losses, that will indicate
whether it will be financially sustainable or not. The following general guidelines apply to infrastructure projects’
financial forecasting:
1. Lifecycle costs: Any capital investment project should show an associated operating and maintenance cost
and the depreciation expense associated with the new assets.
2. Details of sources of funding and loan obligations must be provided. All pertinent loan details must be
provided, including the principle amount, interest rate, collateral required (if any), repayment period and
payment schedule. Municipalities must take care not to enter into loan agreements that exceed the lifespan of
the asset, or to exceed the prescripts of National Treasury on the leveraging of balance sheets.
3. O&M forecasts: As well as the commissioning of new assets, O&M forecasts need to give due consideration
to possible increase in maintenance as assets age, how levels of service targets will be achieved (considering
the service levels gaps) and the impact of changing the service delivery strategy (contracting out). Annexure
C provides some guidance on typical lifecycle costs associated with the different asset types.
4. Renewal forecasts: These can often be one of the most complicated areas to assess, particularly for
underground assets where condition and remaining life is not so easily assessed. The approach is often to rely
on performance issues to occur to predict exact renewal timings, and these generally only occur very late in
the lifecycle. Therefore, for underground assets, renewal projects may only be able to be accurately
determined in the short term. For longer term predictions, these should as a minimum be based on the
assumption that assets will be replaced at the end of their expected useful life. As long as the asset register
contains:
• the replacement cost
• the age
• the useful life
then the expected replacement date for each asset can be calculated and a longer renewal forecast prepared
will give an indicative prediction of asset life.
5. The impact on individual ratepayers should always be shown.
6. Inflation is generally excluded from financial forecasts.
7. All revenue relevant to the asset/service must be recorded. It is considered prudent to present various
revenue scenarios – where revenue is contingent on direct customer payments – based on varying levels of
payment received.
8. Forecasts should be compiled for a period of 20 years, unless it is expected that the probable revenue or
benefits and expenditure or costs will be for a shorter period.
9. The level of detail within a forecast should correspond with MFMA requirements and the information required
from the CMIP. For larger organisations it would be expected that the IAMP would contain budgets to a
greater level of detail and analysis, for example the IAMP should provide:
• a breakdown of the operating costs such as reactive maintenance, pump station inspections, etc, to
provide further insight on the cost drivers;
• a list of renewals by project, at least for the first year; and
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• a list of CAPEX works, at least for the first 5 years.
A key objective of asset management is the provision of levels of service that are affordable. For this purpose it is
appropriate to model various levels of service scenarios into financial forecasts, to assess the financial impact
thereof. The following two figures present two scenarios, as follows:
• Scenario A: Base case (expenditure required to maintain existing service levels) - this may be higher than
current funding levels because of past underfunding, often because of the short-term decision making
approach embedded through annual budget rounds – it is easy to make annual budget cuts and ignore the
longer term implications; and
• Scenario B: Moderate level of service improvements.
The ‘first cut’ IAMPs will often be based around providing status quo services and existing strategies to deliver those
services. The focus is often on making sure that the level of O&M and renewals is sufficient to maintain service levels
(resolving under-funding is often a primary concern in the first AM Plans), and/or that the decision makers
understand the service level implications of not providing sufficient funding. The continuation of status quo service
levels of the ‘base case’, or Scenario A, can be considered as illustrated in Figure 6-19.
Figure 6-19: Scenario A: Base case to maintain existing service levels
SCENARIO A (base case) 2006 2007 2008 2025 Rank
OPERATING EXPENDITURE
Water treatment 10,000 10,000 10,000 10,000 Essential
Reticulation 10,000 10,200 10,404 14,568 Essential
Fixed costs 10,000 10,000 10,000 10,000 Essential
Overheads 10,000 10,000 10,000 10,000 Essential
Depreciation 10,000 10,020 10,040 10,380 Essential
Interest and loan redemption 10,000 11,600 13,198 40,058 Essential
Subtotal 60,000 61,820 63,642 95,006
Less Operating Revenue
Tariffs 50,000 51,820 53,642 85,006
Fixed charges 10,000 10,000 10,000 10,000
Operating Surplus/Deficit Nil Nil Nil Nil
CAPITAL EXPENDITURE
Renewals 30,000 30,000 30,000 30,000 Essential
Growth related (servicingnew development areas)
1,000 1,000 1,000 1,000 Essential*
Sub-total 31,000 31,000 31,000 31,000
Plus Loan Repayments
Total 31,000 31,000 31,000 31,000
Funded by
Capital Development Fund 10,000 10,020 10,040 10,380
Borrowing 16,000 15,980 15,960 15,620
Grant from external agency 5,000 5,000 5,000 5,000
*Unless municipality has ability and political will to prevent the develoment
Impact on tariffs
2,006 2,007 2,008 2,025
Operating revenue 60,000 61,820 63,642 95,006 Average no. of payingproperties connected
50 51 52 69
Average water tariff perproperty per year
1,200 1,212 1,224 1,377
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The base case financial forecast above has been presented in a very simple format. The method used was to
describe expenditure by activity type, such as treatment or reticulation. Other approaches might be to group the
operating expenditure by ward, instead of by asset type. If there was an equitable share allocation or a DWAF
operating subsidy, these would have been included under operating revenue. Operating revenue in this case was set
for a 0% surplus (neither a profit nor loss). It was determined by assuming that tariffs will equal operating
expenditure less overhead costs (R 50,000 in year 1). Fixed charges have been set at an amount that will ensure
cost coverage of overhead expenses (R 10,000 in year 1). To determine the annual water tariff per property, the
operating revenue (tariffs plus fixed charges) is simply divided by the number of households – assuming that all
households receive the same level of service and consume in equal portions.
In practice tariff setting, particularly for water, is a bit more complex. However, the emphasis here is on developing
financial forecasts based on different levels of service scenarios. Tariff setting is discussed in more detail in a
following section.
As AM planning gets more developed, the aim is to be able to present level of service options and the associated
financial and tariff implications, so that municipalities along with the customers/community, can make informed
decisions about future investment.
Figure 6-20: Scenario B: Moderate level of service improvements
SCENARIO B 2,006 2,007 2,008 2,025 Rank
OPERATING EXPENDITURE
Base Case 60,000 61,820 63,642 95,006
Operating costs fromScenario A investment
O&M 20,000 20,000 20,000 20,000 Discretionay
Depreciation 10,000 20,000 20,000 20,000 Discretionay
Interest and loan redemption 50,000 51,100 52,200 105,900 Discretionay
Sub-total 140,000 152,920 155,842 240,906
Less Operating Revenue Discretionay
Tariffs 130,000 142,920 145,842 230,906
Fixed charges 10,000 10,000 10,000 10,000
Operating Surplus/Deficit - - - -
CAPITAL EXPENDITURE Discretionay
Base Case 31,000 31,000 31,000 31,000
Extension of ws scheme 500,000 Discretionay
Improved water treatment
Renewals from new works 50,000
Sub-total 531,000 31,000 31,000 81,000
Plus Loan Repayments
Total 531,000 31,000 31,000 81,000
Funded by
Capital Development Fund 10,000 20,000 20,000 20,000
Borrowing 21,000 11,000 11,000 61,000
Grant from external agency 500,000
Impact on water bill
Average no. of propertiesconnected
100 101 102 119
Average water bill perproperty
1,400 1,514 1,528 2,024
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6.7.6 Detailed assessment of projects: financial analysis
There are many financial tools and indicators with which to assess the financial feasibility of a project. Regardless of
the method employed, it is necessary to establish the costs and benefits of the project over the lifecycle of the asset.
The financial forecast will provide the revenue (financial benefits) and expenditure (financial costs) associated with
the project. There may however be other non-financial benefits and costs. For example, a project could yield
benefits such as faster travel times through the construction of a new road, but with environmental costs, such as
the disruption of an ecologically vulnerable area home to scarce species of plant and animal life.
Before undertaking financial analysis, one needs to “prepare” the cost and benefit streams over the lifecycle of the
asset for equitable consideration. Therefore the first step in a financial analysis is to carry out a Discounted Cashflow
Analysis (DCF) to discount future costs and benefits to Present Value (PV). Doing so allows the organisation to take
into account the opportunity cost of the capital being used. The formula used to discount future cashflow is:
Figure 6-21: DCF formula
DCF formula:Present Value (PV) = Expenditure in year n/ (1 + Discount Rate)n
Example of the application of the DCF formula:Assume that R 10,000 will be spent in year 5, and that a discount rate of 10% will apply. The calculation is as follows:
PV = R 10,000/(1.1^5) = R 6,209
The discount rate referred to in the DCF formula is the rate or factor used to relate present and future money values.
This rate should be provided by the municipality’s Financial Department. Once the present values of benefits and
costs are known, it is possible to assess the financial merits of the project. There are a number of financial decision
indicators that one can use, though care has to be taken in choosing the one appropriate to the problem at hand, as
shown in Figure 6-22.
This guide recommends that smaller local municipalities use BCR for the evaluation of all significant projects (say,
greater than R100,000 capital investments). Some high value or high risk projects may require analysis using all the
techniques noted in the above figure.
To perform a financial analysis, the present values of benefits and costs associated with the project over the lifecycle
of the asset that is proposed must be known. However, for the purposes of financial analysis, we exclude certain
cost items that would otherwise be included in a financial forecast used to determine tariffs and cash flows. The
following cost items are excluded when performing a financial analysis:
• inflation;
• cost of capital, and
• depreciation.
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Figure 6-22: Financial decision indicators
Net Present Value (NPV)
Benefit-Cost Ratio (BCR)
Internal Rate of Return (IRR)
Decision Indicator Formula Application
NPV =
PV of net benefits –PV of investment costs
Purpose:To determine the value created by an investment
Avoid when:Comparing projects where investments costs vary significantly
BCR =
PV of net benefits
PV of investment costs
Purpose:Determines the benefits provided per Rand investedUseful for comparing projects that require different levels of investment cost
Discount rate where:
PV of net benefits = PV of investment costs
Purpose:Ranking of projects where they differ greatly in type and scale, and where insufficient capital is available
Be careful of:Using for the ranking of projects of different timescales – IRR is prejudiced against projects with high initial costs and long term, relatively low benefits (such as a road).
Source: Adapted from NAMS Optimised Decision Making Guidelines (pg 4-5)
The Net Benefits include any financial revenue expected from the project (such as tariffs) and any O&M cost savings
that may arise from the project (for example, a more efficient pump may lower O&M costs). The following figure
illustrates a simple BCR calculation using DCF analysis. Using BCR, a result of > 1 indicates that the project should
proceed.
Figure 6-23: BCR in action
An investment of R 500,000 is considered. The following assumptions are made:
Annual operating costs is estimated at R 10,000Major maintenance is required every 5 years, at R 50,000Annual revenue from tariffs is estimated at R 70,000The discount rate is 10%
The project BCR is then calculated as follows:
Years 5-19 are hidden for simplicity
Present
0 1 2 3 4 20 Value
Capital Investments 500,000 500,000
Annual Costs
Operating Costs 10,000 10,000 10,000 10,000 10,000 85,136
Maintenance Costs 0 0 0 0 50,000 69,725
Total Annual Costs 10,000 10,000 10,000 10,000 60,000 154,861
Revenue
Tariff income 70,000 70,000 70,000 70,000 70,000 595,949
Net Benefit (revenue less O&M costs): 441,089
BCR (Net benefit/investment cost): 0.9
YEARS
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If there had been an asset residual value, it would have been included as a benefit. With a BCR of less than 1, the
project is not justified on a purely financial basis. However there may be community benefits that have not been
quantified in a financial sense but which can be taken into account through prioritisation processes using multi-
criteria analysis, discussed in the following section.
6.7.7 Sector level optimisation
Through the development of the IAMP, service level gaps will have been identified and will have led to a long list of
projects. When we get to sector level prioritisation – e.g.: where a sector has an allocated budget for renewals, or
for improving water quality across the district, and the budget is not specifically allocated to a project, then the
department should have a method of prioritising projects to be undertaken within budget constraints. Below are a
few examples of how a sector-level prioritisation might be applied:
Figure 6-24: Examples of sector level prioritisation
Approach A:Rank projects by BCR (benefits will be calculated by the tariff that can be collected and costs are the operating costs associated with the refuse collection and disposal). Using this methodology, priority will be given to more densely populate areas (more pickups per km), those close to landfills and transfer stations and those where people can afford to pay.
Approach B:Rank projects using a multi-criteria analysis approach where BCR is one factor, with other factors being considered such as the level of poverty in the area, any issues relating to illegal dumping effects, etc.
Approach ARank projects by BCR (benefits can be calculated for faster travel times, reduced vehicle accidents, etc)
Approach BRank projects in order of the number of vehicles travelled on the road each day, giving priority to those with highest traffic load.
Approach ARank projects by the number of water supply interruptions to property being caused by the pipe.
Approach BRank projects using an MCA approach described on the previous page with criteria including number of pipe bursts per year, type of customers connected to pipe (ie more weight given to, say, hospitals rather than residential areas), cost of replacing pipe, etc.
Budget allocated for extension of refuse collection service to ‘area of highest need’ (areas not
specified in CMIP).
Budget allocated for extension of seal to roads in ‘area of highest need’ (areas not specified in
CMIP).
Budget allocated for water pipe renewal (areas not specified in CMIP).
6.7.8 Corporate or municipal level optimisation
Eventually projects from various sectors such as roads, electricity and water will all compete for available funding. At
the corporate or organisation-wide level we are required to use relatively generic criteria to prioritise between
projects because of the different drivers and features that projects have in different sectors.
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Some of the projects identified in the IAMP will be renewals or upgrades required to maintain the existing level of
service. These are considered ‘essential’ funding items and do not include the renewal budget in the cross-sector
prioritisation process. Notwithstanding this comment, it is good practice to have a process for prioritising renewal
projects within allocated budgets.
For the remainder of the ‘discretionary’ (usually level of service improvement) projects, we need a robust and
transparent decision making process to make sure that the projects that will provide the most value to the
community are given precedence. Figure 6-25 and 6-26 illustrate a simple multi-criteria analysis approach to
ranking projects. The framework will need to be developed specifically for each municipality taking into account:
• the AM policy, which will identify the municipality’s corporate drivers – the criteria used to rank the projects
should be in line with the AM Policy objectives;
• the financial assessment results need to be part of the decision framework – there are two ways of doing this,
one is to make the BCR one of the MCA criteria (option A below), the other is to calculate a ‘quasi-B/C’
approach as illustrated in option B;
• the assignment of weights to each criterion should ideally be done through a customer consultation process
which seeks to find out the areas of most value and need, and assigns greater weight to those criteria.
Figure 6-25: Option A: Multi-criteria Analysis
Level of support
from community
Legislative requirement
Risk exposure
Financial justification
20 30 25 25Provide water supply to xy village 10 10 10 5 8.75Extend refuse collection to xy area 5 0 5 10 4.75Upgrade sewage treatment plant to reduce spills into river stream 5 5 5 0 3.75
New library at xy village 10 0 0 5 3.25
Reseal 50 kms of road 10 0 5 0 3.25
Scoring System 0 = No support
0 = No legislative driver
3 = moderate risk
0 = BCR < 1
5 = Moderate support, mainly in local area
5 = Legislative driver unlikely to be enforced
7 = significant risk
5 = BCR between 1 and 3
10 = Strong support across district
10 = Legislative driver likely tobe enforced
10 = high risk 10 = BCR > 3
Weighting
Projects being considered
Weighted Score
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Figure 6-26: Option B: Multi-criteria Analysis
Level of support
from community
Legislative requirement
Risk exposure
30 40 30Upgrade sewage treatment plant to reduce spills into river stream 5 5 5 5 2 2.50 Provide water network to xy village currently supplied by unreliable, poor quality water 10 10 10 10 5 2.00 Reseal 50 kms of road 10 0 5 4.5 3 1.50 Extend refuse collection to xy area 5 0 5 3 2 1.50 New library at xy village 10 0 0 3 5 0.60
PV costs (inR million)
Quasi Benefit-Cost
Projects being considered
Weighting
Weighted Benefit Score
It needs to be decided whether the analysis will consider only the municipality’s cost savings (the lower maintenance
costs) or also savings by the broader community (reduced injury, faster travel times).
Regardless of whether a municipality implements option A or option B, the ranking system will usually not provide an
absolute ranked list that can just be slotted into the CMIP. Factors need to be considered such as whether all
projects that score a 10 for legislative requirement should be moved to the top of the list regardless of scores in the
other areas. Once a ranked list of projects has been developed across the organisation, it is recommended that a
range of scenarios be developed that can be presented in the CMIP, for example:
• Scenario A: Base case/status quo;
• Scenario B: Moderate level of service improvement (all projects with a score > 75 are undertaken); and
• Scenario C: High level of service improvement (all projects with a score > 50 are undertaken).
6.7.9 Tariff setting
There is no uniform and consistent process followed for the setting of tariffs for municipal services in South Africa.
However, most municipalities attempt to recover the costs associated with services such as water and electricity –
hence the basis for tariff setting tends to be the cost associated with the service. SALGA and IMFO also recommend
that municipalities apply certain principles in setting tariffs. This sub-section focuses on the requirements for tariff
setting, and provides a logical process for determining tariffs. In doing so, an understanding of key accounting
terms, and the treatment of costs and revenue is required.
Municipalities have powers to levy assessment rates and service charges, which include revenue from the sale of
electricity and water, as well as charges for sanitation and solid waste removal. Municipalities also receive a share of
nationally raised revenue referred to as the equitable share. Using this revenue, municipalities have to employ staff,
purchase goods and services, maintain existing infrastructure and assets and repay lenders for amounts borrowed,
including interest.
Municipalities also have to replace existing infrastructure and develop new infrastructure. These are financed from
borrowings from lenders, the municipalities’ own cash resources and government grants and subsidies. These new
developments can also generate revenue for the municipality but will place additional expenditure demands on it.
Balancing the revenue generated with the increased expenditure arising from development is the key to ongoing
sustainability.
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The Municipal Systems Act requires all municipalities to prepare a tariff policy that sets out the basis on how tariffs
are set. This Act implies that tariffs should be based on the cost of rendering the specific service. In particular, the
Act encourages municipalities to at least recover the operating and capital costs although special dispensations may
be made to indigent consumers.
There are several principles that inform tariff determination for major municipal services3 that includes water service
provision:
• “tariffs not to be used as concealed taxes;
• ability to pay of consumer not to be used as criterion (except for indigents);
• tariffs to be uniformly and fairly applied;
• tariffs shall recover expenses associated with rendering of each service (unless policy indicates why and the
extent to which such cost recovery is not feasible in the case of one or more services);
• tariffs paid by consumers or users directly related to standard of service provided and quantity of service
consumed or used;
• tariffs may be determined in each annual budget to generate annual operating surplus equal to targeted
percentage of operating expenses: such surpluses will be applied in relief of property rates and/or future
capital expansion of service concerned (NOTE that the percentage surplus must be kept at a modest level if
the tariffs are not to become concealed taxes);
• tariffs for services provided to indigents to be (annually) determined in accordance with the municipality’s
indigence relief programme;
• reasonable differentiation between the tariffs charged to different categories of consumers and users to be
applied;
• the tariff policy to be transparently applied, and all forms of cross-subsidisation between categories of
consumers and users to be fully disclosed (at least) in each annual budget;
• tariffs to be determined in a manner which makes them easy to understand by all consumers and users;
• the services to which the tariffs apply to be rendered cost-effectively;
• directly measurable service consumption to be adequately metered, and meters read monthly (if possible –
if not, the policy must indicate when meters are to be read);
• charges levied to be proportionate to the measured quantity consumed;
• charges to be levied in cases of group (collective) metering of consumption;
• in addition to metered consumption, municipalities may levy an availability charge for the services
concerned: the policy must indicate whether and why such a charge is to be levied, and what purpose it is
meant to serve – availability charges sometimes apply to properties as yet unconnected to the system, but
where connections are already available from the municipality’s side;
• fixed charges may also be levied, usually for connected consumers, in order to cover the basic
administrative expenses of the service (billing, meter reading, revenue collection);
• if fixed charges are levied, do they apply also to indigents; and
• tariffs for electricity, water and sewerage must cover both variable (direct) costs of service delivery, as well
as the fixed costs associated with present surplus capacity”
A process for setting tariffs is indicated in Figure 6-27:
3 IMFO. Local Government Financial Best Practice Manual. SALGA
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Figure 6.27 – Process for setting tariffs
Approve and implement tariffs
Analyse and allocate the cost of services to consumer groups
Determine the cost of service provision at varying levels of serviceAllocate the cost of water services to customer groupings
Analyse the demand for the service in question
Segment water users into customer groupingsAssess current and desired levels of serviceEstablish water consumption patterns and demand for water per customer grouping
Formulate local subsidy arrangements and overall revenue requirements
Identify customer groups in need of poverty reliefEstablish the cost of indigent supportDetermine revenue requirements (funding of future capital activities , and cross-subsidisation to other services)
Select a suitable tariff structure for local conditions
Evaluate various tariff structuresSelect a structure supportive of the tariff principles and local requirements
Calculate tariffsCost recoveryRevenue targetsEnvironmental sustainability , specifically resource protection
Perform affordability checksAssess willingness to pay through :
Willingness -to-pay surveysCurrent level of municipal billsMunicipal service bill of neighboring municipalities
Source: Adapted from dplg (Aug 2000)
Municipalities should note the following when developing tariffs:
a. Analysis of the demand for services - A typical municipal area will comprise of various types of consumers
with differentiated water needs and ability to pay for services rendered. This phenomenon requires that a
municipality segments its consumer base to determine the demand for water, levels of service requirements, and
the ability to pay for services (or the lack thereof). In most municipalities three main groupings of consumers
are found:
• domestic consumers (private households) – some municipalities prefer to treat indigents as a separate
grouping;
• commercial and institutional consumers (including light service user industries) - this grouping includes
users such as shops, offices, hotels and public facilities such as schools, sport clubs and churches; and
• industrial consumers. This category includes industries using large volumes of a service as part of their
operations.
b. Analyse and allocate costs to consumer groups. The following costs should be established that collectively
will inform the baseline for tariff setting:
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• cost of bulk purchases
• distribution costs
• distribution losses
• depreciation expenses
• finance charges
• repairs and maintenance expenses
• administration and service costs, including appropriate overheads, departmental service charges,
contributions to provisions, and all other operating expenses associated with the service concerned
• targeted surplus for the financial year
• cost of indigence relief in the form of free basic water
The cost of service provision tends to differ at various levels of service (RDP standpipe, yard connections, high
pressure industrial connections etc.) Care should be taken to identify the cost package per consumer unit (i.e.
erven) at various levels of service.
c. Formulate local subsidy arrangements and revenue requirements. Most municipal areas will incorporate
an indigent component that has a constitutional right of access to water. Where such a group exists,
arrangements should be made to provide indigent support.
d. Select an appropriate tariff structure. Many types of tariff structures are found, all with distinct advantages
and disadvantages. Some of these types include:
• consumption based tariffs;
• fixed charges per month or some other period;
• time of use tariffs;
• scarcity based tariffs (often a demand management measure);
• geographically varied tariffs;
• quality of service based tariffs; and
• two (or multiple) part tariffs.
These tariffs are not all equally suited to all services and conditions. A careful study, taking into consideration
tariff principles, local demand and consumption patterns, and the composition of the consumer base is required
in deciding upon a tariff structure.
e. Once a tariff structure has been selected, tariff can be calculated and tested for community acceptance and
reasonability, and implemented.
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Asset Knowledge
Level of Service(existing/desired)
Demand
Risk Management
Information and Data Collection
Affordability
Life-Cycle Plan
AM Plan Adoption
AM Practice Improvement Plan
5
4
3
21
9
8
Financial Plan76
6.8 Asset Management Practice Improvement Plan
6.8.1 Introduction
Sound management practice is required to implement a
municipality’s asset management policy. Indeed, without
appropriate management practices there is very little hope
that the
asset management policy and plans can be successfully
implemented.
Infrastructure asset management practice improvement
therefore considers the practice associated with the total
asset management process, from the strategy to the
implementation practices as portrayed in figure 6-28 (from
the IIMM)
Figure 6-28: Total Asset Management Process (Source: IIMM)
CUSTOMER
EXPECTATIONS
LEGISLATIVE REQUIREMENTS
∪ Level of Service∪ Cost
∪ Financial ∪ Environmental
STRATEGIC PLANNING PROCESS
SERVICE LEVEL REVIEW PROCESS
ASSET MANAGEMENT PROCESS
IMPLEMENT ASSET MANAGEMENT SOLUTIONS
CONSIDER ASSET SOLUTIONS
∪ Maintain/renew/ upgrade/dispose of existing assets
∪ Create new assets
CONSIDER NON-ASSET SOLUTIONS∪ Failure
management∪ Insurance∪ Demand
management
Strategic Planning
Tactical Planning
Operational Planning
Asset management practice can be considered in six broad categories, as indicated in the following figure:
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Figure 6-29: Scope of infrastructure management practices
ASSET KNOWLEDGE
STRATEGIC PLANNING PROCESSES
CURRENT ASSET MANAGEMENT
PRACTICES
AM PLAN
INFORMATION SYSTEMS
ORGANISATIONAL TACTICS
Asset categorisation & hierarchyLocationPhysical attributesO&M dataCondition dataPerformance/capacityLifecycle cost dataAsset age & lives
Failure predictionRisk managementOptimised decision makingService level reviewsCAPEX evaluation long termLong term financial planning
Asset registerPlans & recordsMaintenance managementCapacity/utilisation modelsGISAdvanced modelling & analysisProject managementIntegration
Levels of serviceDemand forecasting/managementAsset data, descriptionLifecycle strategiesFinancial forecastsPractice assessment & improvement
IAM review & improvementCommercial tacticsCorporate commitmentAM roles & responsibilitiesSkills & teamsTraining
Project IdentificationContract monitoring & controlDesign/construction standardsAsset handoverAsset rationalisationMaintenance strategyO&M manualEmergency response plans
To improve upon these practices, they first need to be assessed to determine where improvement opportunities lie.
Municipalities are advised to seek the services of professionals to assess infrastructure management practices, to
ensure an objective outsider’s view of existing practices, to identify improvement opportunities, and determine
prioritised improvement tasks. However, as a starting point, an infrastructure asset management practices checklist
is included in Annexure E to assist a municipality in determining whether they have the fundamentals in place.
6.8.2 Approach to improvement planning
Improving upon infrastructure management practices is not a once-off activity, but rather a continuous process that
requires commitment at all levels. In planning for improvement the municipality should pursue reasonable
milestones that can be achieved. This means that these milestones should be coupled to reasonable timeframes, and
has sufficient budget allocation, if there is a financial implication. Care also has to be taken of the municipality’s
ability to absorb the impacts of changes or additional work load introduced through improvement actions. This
requires consultation before implementation, timing the impacts of improvement actions, and properly
communicating – and where necessary, training – to staff to raise the likelihood of successful implementation. The
approach to improvement planning is shown in the following figure:
Figure 6-30: Improvement Process
TIME (years)
Future Vision(Best Practice)
Current Status
AppropriatePractice
SO
PH
IST
ICA
TIO
N O
F A
MP
RA
CT
ICE
S
Achievable Milestones& Review Points
Needs Identified Review
1. Define the activities2. Establish current status3. Confirm appropriate practice4. Identify business priorities for each activity5. Identify tasks to close the gap6. Set the improvement programme and assign resources andresponsibilities
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6.8.3 Scoring of practices
Table 6-25 is a generic scoring approach that can be applied to all elements of infrastructure management practice.
Note however, that these scores measure inputs (or enabling practices) rather than outputs such as improvements in
levels of service or greater cost-effectiveness outputs are in turn measured by service level criteria (as contemplated
in section 6.3 of these guidelines).
Table 6-25: Practices scoring approach
Rating % Description Processes Information Systems Asset Knowledge
(Data and Plans)
1 0 Innocence No process exists.
Never do this. No system exists
No results seen. No confidence in
information.
2 25 Awareness
Minimal documentation.
Ad hoc procedures.
Occasionally do this.
Manual system exists and
some very basic user needs
met.
Minimal results, long way to go.
Very low data confidence.
3 45 Systematic
Approach
Semi formal process, followed
when needed for critical
programs and activities.
Automated system exists.
Basic user needs met.
Some results, still below
expectations.
Low data confidence.
4 70 Competence
Formal documented process
exists, but still evolving.
Process often followed.
Good system in place.
Widely available.
All key user needs met.
Good results, getting there.
Reasonable data confidence.
5 85 Excellence Formal documented process,
well tested and followed.
Strong system in place.
Nearly all user needs met.
Excellent results, still some room to
improve. Good level of data
confidence.
6 100 Best Possible Strictly formal process always
adhered to.
State-of-the-art system in
place. All user needs met.
Unparallel results; a total success.
Very high level of data confidence.
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6.8.4 Improvement milestones
Table 6-26 presents typical milestones in the improvement of infrastructure asset management practice (based on a
World Bank Advisory Note)
Table 6-26: Typical Milestones in Improvement of Asset Management – World Bank Advisory Note
Milestone Requirements
Stage 1
Improvement Strategy Development
• Needs analysis / status assessment
• Setting base strategy/asset management objectives
• Asset data classification
• Collection priorities confirmed
• Asset management improvement program adopted
Stage 2
Basic Asset Register
• Set up basic asset register
• Asset management information system
• Identification of all assets
• Basic data captured
• Asset replacement cost determined
• Asset replacement timetable determined
• Initial asset management plans
• Current levels of service identified
• Basic valuations prepared
Stage 3
Basic Asset Management
• Improve attribute data
• Introduce basic condition assessment
• Valuation based on condition
• Optimize data collection for critical assets
• Maintenance history data identified
• Second generation (basic) asset management plans prepared
• Renewal decision-making processes documented
• Determine target levels of service based on stakeholder consultation
• Costs captured against assets
Stage 4
Improved Maintenance Management
• Review maintenance procedures
• Apply improved procedures to assets
• Schedule procedure intervals
• Review maintenance plans for key assets
• Begin to introduce asset criticality analysis and risk management
Stage 5
Introduce Advanced Asset Management
Techniques
• Complete failure analysis on all key asset groups and critical facilities
• Complete consequence of failure (risk management) analysis on all assets
• Apply these findings to the life-cycle strategy and maintenance plans for assets
• Valuations based on true economic lives
Stage 6
System Optimisation
• Optimized life-cycle and economic decision making used for planning levels of
service, based on ongoing stakeholder consultation
• All options for overcoming failures analysed
• Benefits for each option quantified
• Costs for each option quantified
• Most appropriate strategy for each asset, facility or system identified
• Advanced asset management plans developed
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6.8.5 Developing project plans for improvement opportunities
Following is an example of a simple project plan for a practices improvement opportunity. Note that costs and
benefits are included, to allow a BCA comparison with other proposed improvements if there is a budget constraint.
Table 6-27: Sample practices improvement project plan
Improvement Item (4) Development of O&M strategy and plan for Water Services
Project cost R 280,000 (VAT excl.)
Financial Year 2005/2006 – 2006/2007
Programme Start : May 2006 - Finish : Sept 2006
Internal Manager : Technical Services, Head : Water Division, O&M staff Responsible
External Training providers under current DWAF funded initiative
Detail of Improvement
A comprehensive Operations and Management Plan per facility and asset type must be compiled
for the entire municipal area, with an indication of maintenance schedules, resource
requirements and allocations. Safety will also be addressed.
Benefit of Improvement
1. Improvement of existing O&M procedures
2. Improvement of the general performance of existing water infrastructure assets
3. Will increase the effective life of assets
4. Decreased interruptions and water losses
5. Improvement of service delivery
6.8.6 Evaluating practices improvement opportunities
Once the costs and benefits of competing practices improvement projects are known, they can be ranked using a
benefit-cost analysis as shown in the following table:
Table 6-28: Ranking of Improvement Needs
Benefits
Improvement needs
Leg
isla
tive
com
plian
ce
Imp
roved
LO
S
Co
st s
avin
gs
Ris
k m
itig
ati
on
Op
era
tio
nal
eff
icie
ncy
Cost
( R )
Benefit-
cost
ratio
Assessment of AM skills gap and provision of WSP for
training M M H 0 7.00
Development of O&M strategy and plan L M L M 0 6.00
Inclusion of policy requirement for financial analysis of high
value capital projects M H 0 5.00
Development of risk policy, strategy and register H H H L 70,000 5.00
Development of AM policy and procedures (asset take-up,
changes to asset position, depreciation etc.) H M M 70,000 3.50
Development of maintenance plans for critical assets M L L H > 200,000 2.33
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Asset Knowledge
Level of Service(existing/desired)
Demand
Risk Management
Information and Data Collection
Affordability
Life-Cycle Plan
AM Plan Adoption
AM Practice Improvement Plan
5
4
3
21
9
8
Financial Plan76
6.9 IAM Plan Adoption
The IAM Plan for each sector needs to be submitted to
Council for information and formal adoption.
6.10 Consolidating Asset Information and
Strategies for the CMIP
Section 5 of these guidelines provides an overall process for
developing a CMIP. This toolbox section provides more
detailed description and examples of what is contained
within the CMIP, in particular the sector summaries section.
This section of the CMIP should summarise key information
from the IAMPs. A typical sector summary section would be around 4 pages:
• 1 page infrastructure overview
• 1 page key sector issues and risks
• 1 page level of service targets/scenarios
• 1 page financial forecasts.
An outline example of a sector summary is presented below.
a. Infrastructure overview
Example 1: The municipal road network has the following features:
Land Use/
customer types
Asset quantities Value Typical age and
condition
Level of service
currently provided
Ward 2 75% rural
20% residential
5% industrial/
business
Pop: 20,000
16,000 indigents.
120 km of gravel
roads
140 km of paved
roads
30 km of tracks
8 bridges
R238 million
Replacement Cost
R8 million Annual
Depreciation
R110 million current
value (DRC)
15% of paved roads
in poor condition.
Renewed 10 yearly.
50 % of tracks only
passable with 4WD in
rainy season.
10% serviced by tracks.
40% by gravel roads.
50% by paved roads.
The text description in the table could be supported by a couple of key graphs such as asset condition, or part of the
table could be replaced by graphical illustration of the key statistics.
b. Key Sector Issues
Provide a high level overview of the key issues facing each sector, for example:
• Very high water usage per capita and the need for strong demand management measures
• High number of illegal connections to public network need to be managed – in some areas supply at
standpipes is only available at small flow rates and for a few hours a day
• Particularly high road accident rates compared to other areas
• Problems with illegal dumping of rubbish in particular areas
• Large % of the population still on bucket system
• Outbreaks of illness in XY villages are believed to originate from the water supply
GUIDELINES FOR INFRASTRUCTURE ASSET MANAGEMENT IN LOCAL GOVERNMENT 6-61
dplg
• Under-investment in basic road maintenance and resealing and caused a deterioration in asset condition over
the last 10 years (could be supported by a graphic of Road Condition Index)
• Low use of community facilities and need to consider whether some should be divested
• etc
c. Key Risk Areas
This is intended to be a high level summary of the risk section in the IAMP, presenting the major risk areas and
proposed management action. Describe any relationship with levels of service targets. A couple of examples are
provided below. For further information on identifying risks, refer to section 6.
Public health and safety risks:
• High public health risks associated with use of pit latrines. Strategic scenario proposes to eliminate pit latrines
by 2010 (scenario A) or 2016 (scenario B)
• Water supply relies on one source which is vulnerable to drought
• Old treatment processes causing fluctuating water quality
• Municipality is not carrying out its responsibilities to manage/monitor the quality of private on-site systems
• etc
d. Level of Service Targets
It is important to keep focused on just a few key outcomes when selecting levels of service (performance standards)
for the CMIP. These may well be supported by more technical and detailed levels of service in the IAMP.
Future level of service targets should be presented for a range of strategic scenarios - in the following example:
• Scenario A is a ‘maintain current service levels’ option
• Scenario B is a ‘medium service level improvement’ option
• Scenario C is a ‘high service level improvement’ option.
In fact there may a Scenario below Scenario A that is to maintain current funding levels and allow levels of service to
drop (if current funding levels are unsustainable and basic maintenance and renewals are being deferred).
The example shows a variety of sector examples but obviously each table will be focused on just one sector. Section
6.3 contains further discussion and examples in developing levels of service.
e. Financial Forecasts
Summarised expenditure and funding plans for the next 10 – 20 years should be included for each sector. The
development of financial plans for both IAMPs and CMIPS are discussed in section 6.7.
6.11 Summary
The toolkit concept recognises that existing practice will vary – tools are provided that can be applied according to
the specific needs and priorities of each municipality. In some cases, existing techniques will match or exceed the
practice indicated in the toolkit, but in many cases municipalities will be able to identify the techniques that they
need to adjust, align, completely change, or ones that need to be started from scratch.
GUIDELINES FOR INFRASTRUCTURE ASSET MANAGEMENT IN LOCAL GOVERNMENT 7-1
dplg
7. REFERENCES
• i @ Consulting (Pty) Ltd. 2006 Water Infrastructure Asset Management Plan. December 2006. Lephalale
Municipality. Lephalale.
• i @ Consulting (Pty) Ltd and Africon Engineering International (Pty) Ltd. IMESA Infrastructure Asset
Management Course Manual. 2006. i @ Consulting (Pty) Ltd. Pretoria.
• i @ Consulting (Pty) Ltd, Africon Engineering International (Pty) Ltd and Maunsell. Asset Management Plans
prepared for DPLG as part of the European Union funded programme, 2004-2005, to Strengthen Local
Government in Mpumalanga and Limpopo Provinces. Pretoria.
• The NAMS Group (NZ). Creating Customer Value from Community Assets Manual. Edition 1.0 – October 2002.
Association of Local Government Engineering NZ Inc (INGENIUM) and the National Asset Management Steering
(NAMS) Group. New Zealand. ISBN No: 0-473-09007-4.
• The NAMS Group (NZ). International Infrastructure Management Manual (IIMM). Version 2.0 – October 2002,
Australia/New Zealand Edition. Association of Local Government Engineering NZ Inc (INGENIUM) and the
Institute of Public Works Engineering of Australia (IPWEA). New Zealand. ISBN No: 0-473-09137-2.
• The NAMS Group (NZ). International Infrastructure Management Manual (IIMM). Version 3 - 2006
(International Edition). Association of Local Government Engineering NZ Inc (INGENIUM) and the National Asset
Management Steering (NAMS) Group. New Zealand. ISBN No: 0-473-10685-X.
• The NAMS Group (NZ). Optimised Decision Making Guidelines. Edition 1.0 – November 2004. The NAMS Group
(NZ). New Zealand. ISBN No: 0-476-01151-5.
• National Treasury. Asset Management Framework. Version 3.3 - April 2004. National Treasury.
• SALGA and IMFO. Local Government Financial Best Practice Manual. August 2004. SALGA and IMFO. Pretoria.
• Western Cape Department of Provincial Government (Provincial MIG Unit) and Africon Engineering International
(Pty) Ltd. Monitoring the Condition Municipal Infrastructure Assets in the Western Cape Province. December
2005. Cape Town.
• Worley International Ltd. Strategic Municipal Asset Management Advisory Note. 1999. The World Bank.
ANNEXURE A
GUIDELINES FOR INFRASTRUCTURE ASSET MANAGEMENT IN LOCAL GOVERNMENT A-1
ANNEXURE A
ANNEXURE A - ASSET REGISTER
Example Content of an Immovable Asset Register
1. Identification Reference (using a documented referencing convention)
2. General Ledger Code
3. Movable or Immovable Asset
4. Asset Category and Sub-category (PPE: land, infra, community, heritage, or other; investment property; or
inventory property)
5. Heritage status (indicate if culturally, environmentally, or historically significant)
6. Asset Class (in accordance with a documented convention)
7. Asset Group (group of assets for reporting purposes e.g. network in a particular area, or a specific facility)
8. Description of Asset (clear description e.g. name of facility, asset type, make and model/file ref to plans)
9. Ward Number
10. Asset Location (Erf, street, room – as applicable)
11. Take-on Date (date of delivery or beneficial use)
12. Municipal ownership or lease (owner or lessee and file ref for title deed/lease/rights/restrictions details)
13. Supplier (company name, contact details)
14. Work-in-progress (capital expenses prior to beneficial use of the asset)
15. Original Cost (check treatment of VAT – e.g. invoice ref)
16. Funding Source (name and type of funding of original construction – surplus cash, loans, grants, donations,
reserves)
17. Responsible Department (name of department)
18. Asset Custodian (name of person)
19. Effective Date of Custodianship (date person became custodian)
20. Basic Municipal Service (Yes or No, based on municipal policy)
21. Applicable Contracts (encumbrances, warranties, guarantees, maintenance contracts, etc)
22. Date Asset Last Renewed (full renewal - not partial)
23. Expected Useful Life (years)
24. Age (years from take-on or last renewal)
25. Remaining Useful Life (years - initially, expected useful life minus age – superceded by RUL determined on
latest renewal or on re-valuation)
26. Method of depreciation (usually straight line)
27. Residual Value (usually taken as zero for infrastructure assets)
28. Capitalised Costs (expenses incurred in asset enhancement)
• This month
• This Financial Year
• Since take-on/re-valuation
29. Depreciation (original cost or re-valued amount plus subsequent capitalised expenses/RUL)
• This month
• This Financial Year
• Since take-on/re-valuation
30. Impairment losses (as assessed in re-valuation exercise or ad-hoc impairment event)
• This month
• This Financial Year
• Since take-on/re-valuation
31. Carrying value (original cost or re-valued amount plus subsequent capitalised expenses, less subsequent
depreciation and impairment)
GUIDELINES FOR INFRASTRUCTURE ASSET MANAGEMENT IN LOCAL GOVERNMENT A-2
ANNEXURE A
32. Disposal method (disposed, alienated, lost, stolen, destroyed, or decommissioned)
33. Disposal expense/revenue
34. Date of write-off (date asset physically removed or decommissioned)
35. Re-valuation data (immovable assets only)
• Latest re-valuation date
• Next re-valuation date
• Re-valuation method
• PPE: DRC (or market valuation for applicable buildings)
• Unit measure of asset extent (e.g. m; sqm, kW, Mℓ, etc)
• Extent of asset (number)
• Latest unit rate for replacement (Rand per unit)
• Replacement value (current replacement cost: Unit Rate x Extent)
• Latest re-valued amount (PPE: Replacement value x remaining useful life/expected useful life)
• Change in value in current financial year due to re-valuation (latest re-valued amount minus carrying
value on date of re-valuation)
• Re-valuation reserve (accumulated change in value due to re-valuations)
36. Infrastructure Management Data (immovable assets only)
• Criticality (based on documented grading convention)
• Asset Condition (based on a documented grading convention and linked to remaining useful life)
• Maintenance history (key information to support lifecycle decisions or link to Maintenance System)
• Asset performance (based on a documented grading convention)
• Asset utilisation (based on a documented grading convention)
• Data accuracy (based on a documented grading convention)
GUIDELINES FOR INFRASTRUCTURE ASSET MANAGEMENT IN LOCAL GOVERNMENT A-3
ANNEXURE A
Table A-2: Example Infrastructure Information Collected For Bulk Pipelines
ID N
o
(IA-W
AT/
…)
War
d
Subu
rb
Loca
tion
Des
crip
tion
Pipe
Typ
e
Ø
[mm
]
Leng
th [m
]
Cap
acity
[ℓ/s
]
Rat
e ( R
)
CR
C (
R )
DR
C (
R )
Year
Bui
lt
RU
L
EUL
Crit
ical
ity
Util
isat
ion
[%]
Con
ditio
n G
rade
Dat
a C
onf.
Land
Are
a
[m2 ]
Land
Typ
e
Lan
d Va
lue
(CR
C)
Tota
l CR
C
Pipe
s an
d La
nd
BP-001 4 Ellisras Bulk Pipe V3 to
Ellisras
AC
Class
12
300 5,920 220 551 3,261,920 1,025,175 1982 11 35 Important 90 Fair 2 5,920
Urban
residential -
Medium
Income
355,20
0
3,617,120
BP-002 2 Marapon
g Marapong x2
uPVC
Class
12
250 243 150 551 133,893 105,999 2001 95 120 Important 60 Very
good 1 243
Urban
residential -
Low Income
7,290
141,183
BP-003 2 Marapon
g Marapong x2
AC
Class
12
350 126 300 716 90,216 33,509 1984 13 35 Important 60 Poor 1 126
Urban
residential -
Low Income
3,780
93,996
BP-004 9 Witpoort BH field to
central Res
uPVC
Class
12
160 5,617 60 385 2,162,545 1,730,036 2002 96 120 Important 50 Good 1 5,617
Rural
settlement -
Indigent
5,617
2,168,162
BP-005 9 Witpoort Central Res to
Hugo de Groot
uPVC
Class
12
125 4,221 40 385 1,625,085 1,300,068 2002 96 120 Critical 50 Very
good 1 4,221
Rural
settlement -
Indigent
4,221
1,629,306
BP-006 9 Witpoort Split to Mongalo
uPVC
Class
9
63 2,085 10 220 458,700 366,960 2002 96 120 Critical 50 Very
good 1 2,085
Rural
settlement -
Indigent
2,085
460,785
BP-007 9 Witpoort Split to
Tlapaleborethe
uPVC
Class
12
90 2,230 20 220 490,600 392,480 2002 96 120 Important 50 Very
good 1 2,230
Rural
settlement -
Indigent
2,230
492,830
BP-008 11 Witpoort Split to
Kgobagodimo
uPVC
Class
12
125 2,084 40 385 802,340 641,872 2002 96 120 Critical 50 Very
good 1 2,084
Rural
settlement -
Indigent
2,084
804,424
BP-009 11 Witpoort Split to
Botsalanong
uPVC
Class
9
90 5,407 20 220 1,189,540 951,632 2002 96 120 Important 50 Very
good 1 5,407
Rural
settlement -
Indigent
5,407
1,194,947
BP-010 11 Witpoort Botsalanong to
Kopanong
uPVC
Class
12
110 2,750 30 385 1,058,750 847,000 2002 96 120 Important 50 Very
good 1 2,750
Rural
settlement -
Indigent
2,750
1,061,500
BP-011 11 Witpoort Botsalanong to
Sekgale
uPVC
Class
9
75 3,956 15 220 870,320 696,256 2002 96 120 Critical 50 Very
good 1 3,956
Rural
settlement -
Indigent
3,956
874,276
ANNEXURE B
GUIDELINES FOR INFRASTRUCTURE ASSET MANAGEMENT IN LOCAL GOVERNMENT B-1
ANNEXURE B - RISK REGISTER
Table B-1: Example - Risk Register
Current Mitigation Measures
Proposed Mitigation Measures (Costs and Target Dates) Risk
Responsible Person Drivers and/or
Contributory Factors Comments and/or
Impact Consequence
Probability Risk Exposure
Consequence Probability Risk Exposure
Moderate Likely Significant
exposure
Minor Likely Moderate
exposure
Drought - Mokolo supply
affected when dam runs dry,
Lephalale river dry for more
than 6 months, ground water
depleted.
E Mothlodine
Municipal Manager + Team
with Mayor & Council
Lower than normal rainfall
occurs frequently but those
instances where 2 - 3 dry
years in succession are
experienced can cause
serious shortages.
Insufficient water
availability for human
consumption and
industrial use will result,
conservation measures
are to be used judiciously.
Lephalale and Marapong
affected, villages along
river in RWS affected, all
villages in Mokerong.
• Water Demand Management
• Additional supply sources were developed where no or little
reserve supply is available.
• Operating Rules/Plan for Mokolo dam to be done. Cost: None
(DWAF).
• River water use to be reduced under no-flow conditions. Cost:
None.
• Monitoring of ground water table.
• Artificial recharge of groundwater. Cost: R8m.
• Target date is 31 Dec 06.
Minor Moderate Moderate
exposure
Minor Unlikely Low
exposure
Vandalism - Elevated Tanks,
Pump stations,
Valves, Equipment, Stand taps
etc damaged
ISD, LED, IDP officers and
Community + Technical
Services
SFM van Wyk
Political unrest,
Government failing to meet
expectations,
Poor service standards
Consumers, especially in
rural or low cost housing
areas may vent
frustrations e.g. cost
recovery processes or real
or perceived failures in
service delivery on
municipal property.
• Eradication of backlogs and improved Levels (and standard) of
Service is a priority.
• Improved performance and rate of improvement in service
delivery.
• Proper Institutional and Social development.
• Job creation and poverty reduction is needed.
• Target date is 10. Cost: To be determined.
Major Unlikely Moderate
exposure
Moderate Rare Low
exposure
Water quality failure -
Cholera/Typhoid infection,
Water Pollution,
Poor Quality Ground Water
Sources.
A Shiko
Poor living standards, lack
of hygiene awareness,
overcrowding and sub
standard services
Unchlorinated municipal
water or water from wells
or pools can become
contaminated and cause
illness/death.
• A program was begun to chlorinate all municipal water systems. • Further training and monitoring in chlorination. Cost: R120,000.
• Replacement of remaining class 3 and class 2 water supplies with
acceptable quality. Cost: R8,000,000.
• Target date is 30 Jun 10.
ANNEXURE B
ANNEXURE C
GUIDELINES FOR INFRASTRUCTURE ASSET MANAGEMENT IN LOCAL GOVERNMENT C-1
ANNEXURE C
EXAMPLE UNIT RATES
Municipalities should adopt unit rates that are appropriate to the types of asset actually used and local
conditions. Where possible, rates should be informed by actual tender prices, and national/provincial
data, and must be adjusted for inflation.
Example unit rates are indicated below, with a base date of June 2006. These are not intended to be a
comprehensive listing, nor are they necessarily applicable in all situations. The rates contemplate the overall project
costs, as may typically be used in pre-feasibility cost estimates. Where applicable, the rates include provision for
design and supervision, provisional and general costs, project contingency, and VAT.
Table C-1: Example Unit Rates – Road Infrastructure
Asset Category Description/type Unit Rate
Paved Road, Surface layer All roads Area (m2) R 55
Arterial Area (m2) R 330
Distributor Area (m2) R 275
Collector Area (m2) R 220
Paved Road, Structural layer
Residential Area (m2) R 165
Unpaved Road All roads Area (m2) R 28
Bridges, vehicular Area (m2) R6,000
Bridges, pedestrian Area (m2) R6,000
Structures
Retaining Walls Area (m2) R1,650
Table C-2: Example Unit Rates – Water Supply Infrastructure
Asset Category Asset Description/type Unit Rate
0 – 40 kW R 4,620 Boreholes
40 – 85 kW R 3,740
< 2 Mℓ/day R 550,000
2 – 10 Mℓ/day R 1,210,000
Water Treatment Works
(Civil Structures & Pipework)
10 – 50 Mℓ/day R 990,000
< 2 Mℓ/day R 330,000
2 – 10 Mℓ/day R 726,000
Water Treatment Works
(Mechanical Plant)
10 – 50 Mℓ/day R 594,000
< 2 Mℓ/day R 220,000
2 – 10 Mℓ/day R 484,000
Water Treatment Works
(Electrical Plant)
10 – 50 Mℓ/day R 396,000
> 5 kW R 32,359
6-10 kW R 17,393
11-25 kW R 8,251
26-50 kW R 5,178
51-75 kW R 4,153
Raw water pump station
(Civil Works)
76-100 kW R 3,640
> 5 kW R 61,482
6-10 kW R 33,047
11-25 kW R 15,678
26-50 kW R 9,837
51-75 kW R 7,890
Raw water pump station
(Mechanical Works)
76-100 kW R 6,917
> 5 kW R 40,449 Raw water pump station
(Electrical Works) 6-10 kW R 21,742
ANNEXURE C
GUIDELINES FOR INFRASTRUCTURE ASSET MANAGEMENT IN LOCAL GOVERNMENT C-2
Asset Category Asset Description/type Unit Rate
11-25 kW R 10,315
26-50 kW R 6,471
51-75 kW R 5,191
76-100 kW R 4,551
Table C-3: Example Unit Rates – Sanitation Infrastructure
Asset Category Asset Description/type Unit Rate
<2 Mℓ Mℓ R 2,750,000
2 – 10 Mℓ Mℓ R 2,200,000
Sewage Treatment Works
(Civil Structures & Pipework)
10 – 50 Mℓ Mℓ R 1,925,000
<2 Mℓ Mℓ R 1,650,000
2 – 10 Mℓ Mℓ R 1,320,000
Sewage Treatment Works
(Mechanical Plant)
10 – 50 Mℓ Mℓ R 1,155,000
<2 Mℓ Mℓ R 1,100,000
2 – 10 Mℓ Mℓ R 880,000
Sewage Treatment Works
(Electrical Plant)
10 – 50 Mℓ Mℓ R 770,000
80mm diameter m R 224
110mm diameter m R 308
160mm diameter m R 374
200mm diameter m R 578
Upvc
(12 b
ar)
250mm diameter m R 856
200mm diameter m R 1,034
250mm diameter m R 1,351
300mm diameter m R 1,619
350mm diameter m R 1,759
400mm diameter m R 1,943
450mm diameter m R 2,085
Pumping Mains
Ste
el
(12 b
ar)
500mm diameter m R 2,197
Table C-4: Example Unit Rates –Stormwater Infrastructure
Asset Category Asset Description/type Unit Rate
Earth embankment volume m3 R 165
Outlet No R 550,000
Attenuation
Ponds
Spillway No R 110,000
Catchpits No R 4,180
Grid inlets No R 4,180
Manholes No R 4,950
Stormwater nodes and
transitions
Wing walls No R 22,000
Gabions m3 R 605
Rip rap m3 R 275
Stormwater erosion protection
Stone pitching m2 R 209
300 mm diameter m R 319
375 mm diameter m R 429
450 mm diameter m R 605
Cla
ss 5
0 D
525 mm diameter m R 660
300 mm diameter m R 319
375 mm diameter m R 429
450 mm diameter m R 605
525 mm diameter m R 803
Stormwater pipes
Cla
ss 7
5 D
900 mm diameter m R 2,310
ANNEXURE C
GUIDELINES FOR INFRASTRUCTURE ASSET MANAGEMENT IN LOCAL GOVERNMENT C-3
Table C-5: Example Unit Rates – Solid Waste Infrastructure
Asset Category Asset Description/type Unit Rate
85-litre steel, plastic or rubber Number R 231
240-litre wheeled plastic bins Number R 358
Bins
180 litre steel drum mounted on steel poles for street litter Number R 880
Steel containers with closing lid: 1 cubic metres Number R 4,400
Open top skip: 3 cum Number R 6,380
Open top skip: 4 cum Number R 6,490
Open top skip: 5 cum Number R 7,920
Open top skip: 6 cum Number R 8,470
Tractor with cab: four-wheel drive 61 kw Number R 275,000
Tractor with cab: four-wheel drive 78 kw Number R 330,000
5,000ℓ Honey Sucker Number R 682,000
Bulk containers
10,000ℓ Honey Sucker Number R 924,000
Landfill compactor Number R 2,420,000
TLB (excavations and filling) Number R 517,000
Bulldozer (D6) Number R 1,595,000
Excavator (20 ton) Number R 1,072,500
Compactors and plant for
landfill operations
Water Tanker 10,000ℓ Number R 924,000
H10 Number R 72,600
H15 Number R 83,270
Balers
H15C Number R 113,300
H16 Number R 522,500 Tie
Balers H26 Number R 579,150
C5 Number R 96,580 Compactors
C7 Number R 110,550
2050 Number R 107,800 Chippers
2070XL Number R 386,100
12 meter steel deck 40 ton Number R 256,300
Static equipment
12 meter steel deck 60 ton Number R 313,500
Table C-6: Example Unit Rates for Electricity Supply Infrastructure
Asset Category Asset Description/type Unit Rate
200 KVA Minisubs No R 170,000
315 KVA Minisubs No R 205,000
500 KVA Minisubs No R 240,000
100 KVA Pole-top No R 60,000
200 KVA Pole-top No R 77,000
MV Substations
400 KVA Pole-top No R 125,000
33 KV overhead Km 175,000
11/22 KV overhead Km 120,000
MV Network
22 KV underground Km 2,000,000
Open wire Km 70,000 LV Network
Aerial Bundled Conductors (ABC) Km 122,000
Domestic (overhead) No R 2,500
(underground) No R 4,400
Commercial (overhead) No R 4,300
Consumer connection
(underground) No R 17,200
Prepayment – single phase No R 900 Meters
Credit – single phase No R 400
ANNEXURE C
GUIDELINES FOR INFRASTRUCTURE ASSET MANAGEMENT IN LOCAL GOVERNMENT C-4
Table C-7: Example Unit Rates – Parks and Cemeteries Infrastructure
Asset Category Asset Description/type Unit Rate
Irrigation Automatic sprinkler system m² R30
Ablution facilities Brick with water flush systems m² R50
Garden furniture Fixed seating and play apparatus Item
per park up to
5 Ha
R44,000
Steel structure galvanised or painted, or
brickwork
m R550 Perimeter security
Electric fencing m R70
Landscaping Grass, shrubs, trees m² R45
Table C-8: Example Unit Rates – Civic centres, Community Halls
Asset Description/type Unit Rate
Developed external facilities and civil works sqm grounds R420
Structural and building fabric sqm building R3,600
Building finishes sqm building R610
Plumbing installation sqm ablution and kitchen facilities R1,800
Electrical installation sqm building R1,400
Air conditioning installation sqm air-conditioned area R1,050
Lifts lift/ landing number R27,500
Fire equipment sqm building R450
Equipment for theatre and council chambers sqm of facility R450
Table C-9: Example Unit Rates – General Assets
Asset Category Asset Description/type Unit Rate
Brick/block walls & concrete roof slab sqm R5,200
Brick/block walls & “other” roof sqm R4,400
Pre-cast concrete walls & other” roof sqm R5,300
Prefabricated shed sqm R3,750
Depots and Equipment Buildings
Traditional wattle & plants construction sqm R2,650
Access, secure and landscaped sqm R45
Access, landscaped but not secure sqm R25
External works
Access, secure but not landscaped sqm R25
ANNEXURE C
ANNEXURE D
GUIDELINES FOR INFRASTRUCTURE ASSET MANAGEMENT IN LOCAL GOVERNMENT D-1
ANNEXURE D
EXAMPLE OF BASIS FOR ESTIMATING ANNUAL OPERATIONS AND
MAINTENANCE BUDGETS
The examples presented in this annexure are estimated median costs for the operations and maintenance of assets
on the assumption of an outsourced service (ie including labour, materials and consumable costs). In recognition of
the fact that the level of effort required in any specific application may vary considerably, municipalities should
ensure that the figures adopted are appropriate to the types of asset actually used, local conditions (social, climatic,
topographic and geotechnical), and the expected standards of service. Where possible, the figures should be
derived from a detailed assessment of resources used, and may be informed by appropriate benchmark
data.
The annexure is not intended to be a comprehensive schedule covering all asset categories and types.
Table D-1: Indicative Network Annual O&M Budgets
Network Asset
Operations
(%CRC)
Maintenance
(%CRC)
Arterial 0 8.2
Distributor 0 4.4
Collector 0 1.75
Pavement surface
Residential 0 0.5
Arterial 0 1.2
Distributor 0 1.2
Collector 0 1.0
Pavement structural
layer
Residential 0 0.1
Arterial 0 0.5
Distributor 0 0.5
Collector 0 0.5
Gravel Road surface
Residential 0 0.1
Footpaths Hardened surface 0 0
Bridges, vehicular 0 1.5
Bridges, pedestrian 0 1.4
Culverts 0 1.1
Structures
Retaining Walls 0 0.6
Gantries 0 0.3
Street Signs 0 10
Traffic Signals 0 3
Street Lights 0 1.1
Guard Rails 0 5.7
Roads
Street Furniture
Commuter Shelters 0 1.0
Dams 0.4 0.25
Boreholes 1.8 5.7
Civil Structures & Pipework (Water Treatment
Works)
R120 000/
Mℓ/d
0.9
Civil Structures & Pipework (Pumpstations) 0.1 0.5
Civil Structures & Pipework (Reservoirs) 0.1 0.7
Mechanical Plant 3 4.6
Electrical Plant 2 2.3
Bulk Water Pipelines 0.1 0.5
Reticulation 0.1 1.5
Water Supply
Treatment package plants 3 3.3
Sanitation Civil Structures & Pipework (Sewage Treatment R180 000/ 1.4
ANNEXURE D
GUIDELINES FOR INFRASTRUCTURE ASSET MANAGEMENT IN LOCAL GOVERNMENT D-2
Network Asset
Operations
(%CRC)
Maintenance
(%CRC)
Works) Mℓ/d
Civil Structures & Pipework (Pumpstations) 0.1 0.5
Mechanical Plant 3 4.6
Electrical Plant 2 2.3
Bulk Pipelines 0.1 0.5
Reticulation 0.1 1.5
Treatment package plants 3 3.3
Open Channels – Lined 0 1.4
Open Channels – Unlined 0 10
Pipes (<600mm diam.) 0 0.65
Pipes (>600mm diam.) 0 0.35
Nodes and transitions 0 1
Erosion protection 0 1.25
Hydrological monitoring and measuring equipment 0 1.5
Ponds 0 0.35
Pumpstation: mechanical plant 3 4.6
Pumpstation: electrical plant 2 2.3
Stormwater
Pumpstation: civil structures 0.1 0.5
Vehicles 5 5
Compactors and plant 4 5
Static equipment 3 3
Weighbridge 2 2
Landfill R 27 per ton R 12 per ton
Bins 20 0
Solid Waste
Containers 10 10
Transformers 0.3 5.2
Feeders 0.8 1.7
Mini-substations 0.2 1.6
Electricity
Substation switchgear 0.3 0.5
Irrigation See note 7.7
Ablution facilities See note 7.3
Garden furniture 0 2.7
Perimeter security See note 2.3
Parks and cemeteries
Landscaping See note 7.7
Developed external facilities and civil works See note 5
Structure and building fabric 0 0.55
Building finishes 0 2
Plumbing 0 3
Electrical 0 3
0 6.3 Air conditioning - Central plants
- Small units 0 3
Lifts See note 13.6
Fire 0 4.5
Equipment for theatres and council chambers See note 3.5
Buildings
Gas installations See note 2.5
Note: the operations budget will depend on the level of service and usage of the facility.
ANNEXURE D
ANNEXURE E
GUIDELINES FOR INFRASTRUCTURE ASSET MANAGEMENT IN LOCAL GOVERNMENT E-1
ANNEXURE E
ANNEXURE E
CHECKLIST FOR CORE INFRASTRUCTURE ASSET MANAGEMENT PRACTICES
NAME OF MUNICIAPLITY: ___________________________________ DATE: ____________________
1 Infrastructure asset knowledge
1.1 Do you have an asset register for infrastructure? Yes No Partly
1.2 Is the asset take-on value, date, age, capacity and materials type recorded? Yes No Partly
1.3 Are all infrastructure assets recorded in the asset register? Yes No Partly
1.4 Can asset data be grouped to reflect asset groups, facility and network information? Yes No Partly
1.5 Does the asset register contain information that allows assets to be easily located? Yes No Partly
1.6 Are as-built drawings available for all assets? Yes No Partly
1.7 Can you ascertain the risk exposure (criticality) for each asset from the asset register? Yes No Partly
1.8 Are planned maintenance activities recorded against assets? Yes No Partly
1.9 Are service failures/customer complaints/breakages recorded against assets? Yes No Partly
1.10 Do you track the utilisation levels of key assets? Yes No Partly
1.11 Do you regularly assess the condition of assets and record condition grades against them? Yes No Partly
1.12 Do you track the costs associated with each asset (creation, O&M and refurbishment)? Yes No Partly
1.13 Is a documented process in place to capture and update asset data in the asset register? Yes No Partly
2 Strategic planning
2.1 Do you have performance measures that address levels and standards of service? Yes No Partly
2.2 Do you monitor and report on performance at network level? Yes No Partly
2.3 Do you regularly assess the demand for infrastructure services (backlogs, extensions etc.)? Yes No Partly
2.4 Do you regularly assess the ability of your infrastructure to meet the demand for services? Yes No Partly
2.5 Do you consult with communities on issues such as service level needs and affordability
issues?
Yes No Partly
2.6 Do you have a corporate risk policy and plan that addresses infrastructure? Yes No Partly
2.7 Do you actively undertake infrastructure risk mitigation? Yes No Partly
2.8 Do you prioritise projects based on funding constraints, backlogs and service risk? Yes No Partly
3 Current IM practices
3.1 Do you consider the full lifecycle costs of each proposed capital project? Yes No Partly
3.2 Do you have a CAPEX plan that addresses backlogs, service extensions, renewals and
upgrading?
Yes No Partly
3.3 Do you manage to spend capital according to plan? Yes No Partly
3.4 Do you have processes in place to manage contractor performance? Yes No Partly
3.5 Do you have a documented O&M plan? Yes No Partly
3.6 Do you practice preventative maintenance for critical assets? Yes No Partly
3.7 Do you have structured responses to infrastructure failures? Yes No Partly
4 Asset management plan
4.1 Do you prepare iAPMs? Yes No Partly
4.2 Does the iAMP supports the achievement of corporate strategic goals? Yes No Partly
4.3 Does it propose a lifecycle plan for the management of infrastructure? Yes No Partly
4.4 Does it provide a financial plan indicating how infrastructure service objectives will be
financed? Yes No Partly
GUIDELINES FOR INFRASTRUCTURE ASSET MANAGEMENT IN LOCAL GOVERNMENT E-2
ANNEXURE E
4.5 Does it provide an infrastructure management risk plan? Yes No Partly
4.6 Does it provide an infrastructure management practices improvement plan? Yes No Partly
4.7 Is the plan addressed at the needs and level of understanding of key stakeholders? Yes No Partly
5 Information systems
5.1 Do you have an electronic asset register? Yes No Partly
5.2 Is the system user-friendly, with easy reporting capabilities? Yes No Partly
5.3 Do you have a GIS system? Yes No Partly
5.4 If you have an electronic asset register, is it linked with the financial system? Yes No Partly
5.5 If you have an electronic asset register and a GIS, are they linked? Yes No Partly
6 Organisational and commercial tactics
6.1 Do you benchmark against other municipalities to compare the cost of service delivery? Yes No Partly
6.2 Do you take steps to ensure that your tariffs are reasonable? Yes No Partly
6.3 Do you have an asset management team in place? Yes No Partly
6.4 Do you have top management and political support for your asset management
programme?
Yes No Partly
6.5 Are sufficient resources made available for asset management improvements? Yes No Partly
6.6 Are AM roles & responsibilities included in the PMS, and in the performance contracts of
managers?
Yes No Partly
6.7 Do you regularly assess AM skills and capacity requirements? Yes No Partly
6.8 DO you take steps to ensure that sufficient AM skills and capacity is available? Yes No Partly
6.9 Do you keep track of legislative developments, and adjust your IAM framework accordingly? Yes No Partly
6.10 Is the responsibility for IAM allocated to a multi-disciplinary team Yes No Partly